Feeding Frenzy? Buyers Looking for a Below-Market "Deal"
Vulture: 1. Bird of Prey found in Africa, Eurasia, and the Americas. It has dark plumage and broad wings and feeds on carrion. 2. Predator – somebody who waits or looks eagerly for opportunities to take advantage of somebody else, especially somebody weak or helpless.
In either definition it appears they are starting to circle. They, being a certain segment of the current buyer population who are seeking the Holy Grail, defined in this case as a property, any property, that can be had for 10-20% or more below current market value. This after the market value for many of these properties has already fallen 5-15% over the past two years.
A recent conversation with one of my “investor” clients who I have been spending too much time with over the past year went something like this:
Client: “Find me a property that’s 10-20% below market!”
Me: “Again?”
Been there, done that! Several times, already. They didn’t bite on any of the five or ten they could have had. Whatever I find for them is not good enough. It’s not enough to maim the seller. They want to pour salt in the wounds and hear them scream before the burial.
This same client also asked me to evaluate all of the 120+ homes that recently went to a well-publicized auction here in San Diego and pick five for them to see. No problem! I have a little free time on my hands this afternoon. In case I wasn’t already eagerly on board, they reminded me that I stood to make 1% by representing?them at the auction. Hopefully, I might be able to squeeze in a little trip to the BMW dealer on my way.
You may remember this auction as it was well documented in the San Diego Union. The most memorable comments from attendee’s of the auction were along the lines of, “I got caught up in all the hype and I think I paid too much!” or “There were one or two good deals, but for the most part the homes sold for too much”. I suggested that what they were asking of me was a bit overwhelming, and warned them that it’s really a place for the pros who do it for a living. Bottom line: They attended the auction alone, they didn’t bite (again), and I didn’t waste more of my time evaluating 120 properties that I knew they wouldn’t buy.
The message? It’s tough to find the bottom; the bottom of the market, that is. But that’s what some are trying for. No, they are not just trying for the bottom, but below the bottom of the market. And we aren’t talking about pure investors here – These are folks looking for a property for personal enjoyment.
Actually, my clients are nice people, but they have succumbed to a trait that is ordinarily not in their nature – greed. The Vultures are out in force now, but few will succeed. I have seen it. Their common sense is too blurred by the frenzy of the possibility of a kill, so much so that they miss many great meals, seeking the five-course Holy Grail.
Speaking of… You may remember the Black Night in the classic movie Monty Python & the Holy Grail. That’s the dude who gets his arm cut off by Arthur, then another, then both legs. What remains of his torso is sitting on the ground. Arthur (read “Buyer”) says something along the lines of, “You can’t hurt me. You’ve no arms or legs.”, whereupon the Black Knight, now only a torso with a head says, “It’s just a flesh wound. I’ll bite you to death!” That’s the seller, hanging tough.
They try to beat up the seller. Lots of brain damage to the?buyer and the agent(s) and, usually, nothing to show for it. Firing blanks is not a career I want to be in nor does it do any favors for my clients, unless they just want to spend an extraordinary amount of time with me. Kris can attest to the fact that one might be considered “lacking capacity” for wanting that.
Don’t get me wrong. Kris and I have had great success on behalf of our buyer clients over the past two years. We love a great deal and work hard to get it. But at some point, reality has to kick in if you want a chance for success. Fortunately, most buyers recognize a decent deal when they see one, hence the tens of thousands of successful transactions in San Diego over the past two years. No, it’s not a perfect market as is obvious by the short sales and foreclosures we now see, but they are a relatively small number when compared with the total and in my opinion will be filtered through the system in the next 12-16 months.
Vultures have a place in this world and in this market, but a small, very small one. Try being a predator and you might find yourself searching for, but never finding, the Holy Grail. It could be a long time without a satisfying meal.
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