I promised Commenter Stephanie a new post responding to questions she had on dual agency. To Stephanie: The post is in the hopper, and I promise to finish it up this week. I kept getting stuck; I couldn’t quite squeeze my Big Thinking hat over my head. That’s because I need to see James.
Today is the big day. I have the much anticipated appointment with a man who, every sixty days or so, I find myself placing my complete faith and trust in, a man I barely know. It is James’ job to periodically restore the spaghetti bowl on my head to its former glory. This is risky business, the color and cut process. It is risky because too many years of the beautification ritual have resulted in a natural hair color that is anyone’s guess. One might make the mistake of letting my roots dictate the color palate, but my roots are a fickle thing as I get older. They’re blond, they’re brown, no wait! Next week, I won’t be surprised if my hair starts growing in green.
More importantly, my sort-of regular appointment with James is a turkey shoot at best. He is extremely inconsistent. I often make the mistake of assuming he can just follow the lines, since we set a bench mark six weeks ago. “Just a trim,” I say, yet the girl who walked in a little shaggy is shuttled to the exit doors three hours later looking like she had spent the morning standing too close to a weed whacker. Then on other days, the clouds part, the angels sing, and the result is that I leave looking kind of good “for my age.”
I should know better. Any woman out there knows that setting an appointment with a good hair stylist is a lot like booking Bono for a goodwill tour. They both are in huge demand. Not so James. “I need to schedule some time with James,” I announce. “How soon can you get here? Now? In an hour? Tomorrow? Would you like to come today and on Tuesday? He’s available!” This is not a good sign.
The Real Estate Market in Inconsistent
Much like a date with James, you never really know what is going to happen on any given day. One minute, our buyers or sellers are in multiple counter offer situations and the next we see a listing, by all accounts properly priced, languishing for months. One day, buyers are out in force, and all seems right with the world while the next finds us sitting an open house you can shoot a cannon through without hitting a live body.
We continue to get calls and e-mails from people wanting to buy a foreclosure — or a short sale. We ask what type of home they are looking for. “A foreclosure — or a short sale,” they say. We rephrase the question. Bedrooms? Location? Price? “A foreclosure — or a short sale.” Translated, they want a deal.
Who doesn’t? The San Diego Union, quoting Brian Yui, CEO of HouseRebate.com, reported this morning that “17 percent of home sales countywide that closed in the 30 days ending June 26 were ‘overbid,’ meaning that they sold for more than the original asking price” and that most overbidding is happening on bank-owned listings under $500,000. Now, I can’t confirm this number, but I can tell you from our own experiences that I don’t doubt it for a minute.
The flip side is that we get as many calls from people insisting that they do not want to look at short sales or bank-owned homes, because they are not in the mood for the time commitment and uncertainty that is part and parcel of the deal-seeking distress sale magnet. I can’t argue with them.
We are seeing banks consistently price their homes below market, presumably below the Broker Price Opinions (BPOs), in order to both move the properties quickly and at a higher price than they would have had they priced them at “value.” It is a strategy that is working, working for the banks by not necessarily for the deal-seeking buyer.
A loan originator recently gave us this sound bite, “You can get a great deal on a crummy house, an average deal on an average house, and a crummy deal on a great house.” I find this true with one caveat; you can get a good, not a great deal, on a crummy house. I have spoken ad naseum about the two markets we have running in tandem. The vast majority of buyers today either want falling-down ugly, the house you can’t bark loudly enough at, or they want the picture of perfection. In either case, the extreme is going to cost you, because today you are competing with many others chasing the very same thing — the outlyers.
Demand will always drive price, and when the demand is mostly in the price camp (those determined to buy at a price that will impress the friends and family), be prepared to compete for (and lose a few) of these holy grails. If there is a smoking deal out there, hundreds like you are going to be attracted to it, and suddenly the smoking deal becomes a only a good deal — for one lucky winner. In the meantime, there are perhaps a dozen more people who will leave empty handed.
The Law of Scarcity
The Law of Scarcity is about percerption. Perceived value increases as availability diminishes. One can argue that this value is artificial.
Like a date with Jose Ebert (you guys won’t get it, but the women will), the conventional wisdom is that the short-sale or foreclosure home is a trophy. They have read the hype, and they want the bragging rights; they want one of those in large part because so, too, does everyone else. Perhaps I should be more worried that James is a little too available, much like today’s buyers tend to worry that absent a competitive situation, they are buying into something that is of inferior value. But, I am here to tell you that I once had a Jose Ebert do. It took far too long, and the results were hideous, no better than Haircuts-Backward-R-Us. Or James on a bad day.
So now, if I want a haircut in my lifetime, I book James. I generally get a good results at a good price without a lot of brain damage. In fact, I can get several haircuts during the time others are waiting on a single, trendy opportunity. If you really want a home, and not just a trophy, avoiding distress sales might be the way to go. You will find that there really are many good deals out there on some very good homes.