Is there an Unrealistic Sellers vs. Unrealistic Buyers Stand-off

kellyfootaApril 6, 2011

You hear a lot about "unrealistic sellers" these days, but lately I have read some articles that really point to "unrealistic buyers", as well. Something is finally going to have to give. A realtor sent some marketing information out to the neighborhood today that pointed out that interest rates are on the rise and a lot of buyers are shying away from foreclosures because they fear the robo-signings will make titles "unclear" and they are shying away from short sales because of the length of time and hassle in dealing with the banks. In trying to sell our home (which is now being marketed at $100,000 less than it appraised in 2008, which was not the height of the market!), I am finding that buyers seem to want everything in perfect condition at foreclosure pricing. If we don't sell at this price, we already have several people interested in leasing it and rents are going up. We, and many other sellers, are not willing to wreck our credit with a short sale or a foreclosure, so if we have to sit on it and rent it, we will. (my husband took a job in another state) I think today's media loves the drama of the "real estate bubble crisis", but I am seeing a lot less of distressed housing in our area and I read that certain portions of the country are already recovering quite nicely. I just wish the media would do more coverage of buyers "managing their expectations", as well. Any thoughts?

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As long as sellers are willing to give in to the buyer's expectations of condition/price, the buyer's expectations aren't unreasonable. If sellers aren't willing, then buyers will keep not getting houses they want and eventually it will sink in that they don't have reasonable expectations.

    Bookmark   April 6, 2011 at 9:52PM
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I have been seeing this for a few months now. Buyers still want to believe that the market is 3 years ago when they could low ball and the majority of sellers would take it. I see very few sellers accepting low ball offers. They are choosing to decline the offer or just sticking to their price. I've heard more than a few times, "we'll just rent it out". Time for the buyers to get real! I have a married couple that I have been working with for almost a year now. They want one particular community. They started out in the $525k range. Everything they looked at was "overpriced" according to them. THey then decided to look in the $350k range.(same community, different phase) Those homes were "overpriced too". They are always surprised to hear that those "overpriced" homes have offers or have sold. Two weeks ago, they decided they wanted to "rent". There was one home for rent in the community. It had an offer when I called to show it which my buyer knew about. The offer fell thru and I called my clients. She tells me "its overpriced, he needs to get real". Ok, two days later, it rented out. Somehow I dont think they are getting this.

    Bookmark   April 6, 2011 at 10:12PM
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There's a lot of variation between localities -- meaning that compared to average the good is much better and the bad is a whole lot worse. The predictions on a national level are also all over the place, from some saying we've hit bottom to others saying we have much farther to fall. I could see it going either way depending on employment and the overall economy.

My area is doing better than most. The big local paper ran a front-page story recently predicting home prices here will hit bottom later this year, so that can't have helped people trying to sell now. In addition, local news is reporting that rentals are nearly full and apartment construction is taking off.

So my take is that people are scared enough to hold off and rent if they don't find the right deal. I think if a market direction becomes more clear then people will be more confident.

    Bookmark   April 6, 2011 at 10:24PM
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In trying to sell our home (which is now being marketed at $100,000 less than it appraised in 2008, which was not the height of the market!)

Your appraisal is not what the market will bear (let alone a 3 year old appraisal). Your price is set by what buyers are willing to pay. We just sold our house in a matter of days with multiple offers. Now that we are buying, I expect sellers to be as realistic as we were. We sold below what we paid in 2005 after putting in a dream kitchen and master bath and upgrading the house in every way possible (windows, insulation to boot). We thought we would live here forever and the price would recover when the market recovered. The job market changed that. Oh, and we are in a rather hot market just outside DC with few foreclosures. Our tax assessment in 2008 was higher than what we could command price wise in 2011.

    Bookmark   April 7, 2011 at 12:14AM
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We sold our house for about 10% less than we paid for it in late 2006. This is in Texas which is theoretically not a bad market. In some ways prices have held up and many sellers are not willing to reduce their price to sell within a reasonable period. Perhaps we would have ultimately sold for me if we stood firm on price. However, the carrying costs of the house would have eaten up the higher price in 6 months of waiting to sell so that didn't seem worthwhile either.

    Bookmark   April 7, 2011 at 1:20AM
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There are always unreasonable buyers and sellers during any time period. Most people also don't react to change well or quickly. Couple that with rapidly changing markets and you have the recipe for a big disconnect between buyers and sellers.

Markets have a way of sorting this out eventually, but it certainly can be frustrating to anyone caught up in it right now. The only thing you can really do is to make fair offers and list at fair prices and then just work with the people who can deal with that. As a buyer or a seller, there is no use wasting your time with people who have unrealistic expectations.

    Bookmark   April 7, 2011 at 8:49AM
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I've been reading a lot of posts on various sites. I often see buyers exclaiming that a particular home they are interested in is price "20% above market value." And then I hear sellers saying "I cannot sell for less than" $XXX and then mentioning the price at which they bought that house years ago.

I think a chunk of sellers are asking for too high of prices because otherwise they need to bring money to closing. But I also don't think that all of these buyers are correct that everything is overpriced. They are bargain hunting which I don't totally agree with.

    Bookmark   April 7, 2011 at 9:46AM
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I think Billl sized it up to the T. There is a disconnect. This isn't the first time such an occurance has happened. I'm old enough to remember my parents talking about property sales when they were first married toward the end of the great depression. If you are younger than fifty, you probably haven't heard such talk at the table.

My parents both had jobs, so they were fortunate. The blinking banks were cold-calling them because they had so many foreclosures they were selling homes for pennies on the dollar and out fishing for someone......anyone......who might have enough assets to have a down payment.

It is not cut in stone that real property can't ever depreciate. You also cannot compare its worth to other economic indicators like inflation or wages because there are real artificial manipulations in force to control the economy than if it had been left to adjust itself. IOW don't look for precedents. It's an whole new ball game.

I'm not a buyer. I have one property I'd like to sell but I'm sitting on it for the long term until there is some recoup in property values. I'm in a position I can and still come out ahead but everyone's situation is different.

I do not blame buyers for looking for bargains. I have had a few try to low-ball a house I sold four years ago to advantage the housing slump. So what? I eventually got about twenty percent above asking price in the same market. There are also those who are willing to pay what a house is worth to them and sometimes it agrees with what it is worth to the seller.

There was a tremendous bubble in real estate and it had to burst. I still believe it was caused in large part by creative financing. I don't necessarily blame all those who bought houses costing more than they really could afford, because even the worst possible junk out there was selling for ridiculous prices and if they wanted to advantage home ownership that's what they had to choose from.

It's all part of an economic re-adjustment and I am optimistic that in the long-run if we treat it right and don't intervene to ridiculous extents it might be a healthy trend. I think it has caused a lot of us.....both buyers and readjust our expectations and long-term planning.

    Bookmark   April 7, 2011 at 1:12PM
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Long before the recent market disruptions I was seeing buyers who thought that a 60 year old house should be like a brand new house.

I told more than one of them to buzz off (and then sold the houses involved for more than they had offered withing a few weeks).

    Bookmark   April 7, 2011 at 4:15PM
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We bought our house in 1971, when the market was similar to todays. I was young but remember there were many houses for sale and it was certainly a buyers market. We sold it last year and regret we didn't list it a few years before. At that time it was appraised by Chase for $300,000 above, what we later sold it for in 2010. We kicked ourselves for not selling sooner, but still got a good price. I'm not sure what we would have done if it hadn't sold, but suspect I would have waited hoping the market would correct.

My daughter, and husband were house shopping in 2006, in our area. I would go with them to look at some of the homes. I was shocked at the prices. Houses built in the 50's-60's were asking over a million dollars. Some with no updating, original wood paneling and pink bathrooms where listed at $800,000+ and there was bidding wars.

We looked at houses listed for $900,000 which wound up selling to the highest bidder for 2M. It was like a shark frenzy. It was beyond what I could deal with. I was no help to them because I'd walk into houses and state 'they have to be kidding!' I couldn't believe the asking prices.

We were lucky to get a decent price last year. Nothing like we would have gotten 5 yrs prior, but still decent. My area is a close suburb to Manhattan and desirable.

Prices here have not plummeted but have dropped closer to more normal pricing for such an area. I still think they are over-priced but not anything like 03-06.

Being a buyer now is so difficult. I see people holding on to their prices refusing to drop. I cannot offer on properties which I feel is over-priced. They are still so overpriced, I feel uncomfortable making an offer at a price I feel is reasonable.

People do not want to bring money to the table. They are holding on to these properties in the hope they can clear their mortgage. I am amazed how long people can carry properties and not move on.

My Agent said, sellers cannot afford to drop their prices any lower. They must clear their mortgages.


    Bookmark   April 8, 2011 at 12:26AM
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I was a realistic seller and took my financial hit last year. Thankfully we were conservative when we bought seven years ago and had plenty of cash and equity. It still hurt financially and we basically did tens of thousands of dollars in upgrades for "free".

Since our sale, we have been looking for a year. I live in a small, affluent area where many people have an overinflated idea about the worth of their homes. People that did extensive upgrades are the worst offenders.

Very well priced homes with superior locations are being purchased but other than that nothing is really happening for sellers. Our paper is still filled with foreclosure notices. You have to take that in consideration when you are buying or selling. As a buyer, I refuse to buy another person's white elephant. Been there, done that, got the t-shirt.

    Bookmark   April 11, 2011 at 2:12PM
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Not to beat a dead horse, but as my husband said, the problem now is that the market is frozen or broken. This WSJ article sums up the problem nicely.

After getting a ridiculously low offer today and having a waitlist of people wanting to rent our home, the only left is to just surrender and laugh.

Here is a link that might be useful: WSJ article about Buyer/Seller Stand-off

    Bookmark   April 30, 2011 at 4:56PM
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The WSJ has made the not uncommon mistake that all real estate is local.

What is happening in one location is not always a good indicator of what is happening in another.

If industry leaves a particular location,. the value of housing may decline.
the town next door that relies on different plant may be unaffected.
One location may have bargains (if you are not dependent on the industry that dried up) while the next town may be doing fine.

    Bookmark   April 30, 2011 at 8:28PM
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I have to agree with Deee. Last month we bid on a house using recent comps. The house was in nice shape, but not particularly updated. All the sales data showed the asking price to be $75K too high. One of the comps was a house built and occupied by Frank Lloyd Wright with a panoramic view of the water. Most of the comps were not short sales or foreclosures. The listing agent responded with "comps" above the asking price, yet the homes were much larger on larger lots and fully updated.

It is highly unlikely the home would appraise anywhere near the asking price. We certainly do not want to overpay either. We have kept looking, but we keep seeing the same thing: houses on the market 6 months and more, priced far higher than local comps. In our experience, owners who made upgrades in the 1990s are the worst offenders. Those applicances are aging and the baths look dated, but those owners are thinking they "recently" updated everything.

Owners, buyers are out there. Educate yourself about what your house is really worth. Be realistic. Is that pink formica in the kitchen really current in today's market? Wallpaper in every room? How about the plastic tub surround? Did your neighbor sell their house for $150K less than you are asking? There are buyers for those properties, but stop thinking you should get what you would have in 2005.

    Bookmark   May 1, 2011 at 11:47PM
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teched, I have to say that you've nailed it.
Keep in mind that the asking price is often set higher than comps so that the seller has negotiating wiggle room when a buyer makes a lower offer.
Almost everyone in my neighborhood who was on the market pulled out after 6-12 months when they realized they weren't going to get 2006 prices. Now we've got heirs selling houses who don't care what they get, so they're driving the market down because those homes are not "distressed" (homes were built in 1970-ish timeframe, so folks either got out early into retirement homes, or they're dying here, harsh, but reality in a neighborhood with not many kids, lots of weekend grandkids.)

    Bookmark   May 3, 2011 at 7:19AM
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This may be off topic...It's not so much that buyers want a perfect house, at least not ALL buyers, it's that FHA won't allow you to get a less than perfect house, if FHA is the route you're going.. This is the problem we've been running into. I am looking for an older home, which in our area, there are plenty of and for sale, however, FHA won't approve them, and we can't afford a conventional loan. Mind you, these are not houses falling apart, with roofs caving in, these are homes that need some TLC but nothing catastrophical that would prevent a person living safely in the home. It's the banks that make stupid excuses for not wanting to lend out money for older homes, which is insane.

    Bookmark   September 27, 2011 at 3:11PM
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"It's the banks..."

Sound like it is FHA in your area.

The banks never get a chance.

    Bookmark   September 27, 2011 at 3:38PM
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This is my experience in the panhandle of Florida. We are looking for a vacation home, and are cash buyers. We have narrowed it down to 3 neighborhoods, all built within the last 6-10 years.

Each has substantially identical houses, within a couple hundred square feet in size. In one, for example-sold comps within the last 9 months put values at 360-380,000. There have been 7 sales. Currently listed are 5 houses, and prices range from 438,000-549,000. So ALL houses are listed anywhere from 50-190,000 above market value. The highest are listed above what the owners paid in 2005-2006. Did they miss the news? The other 2neighborhoods have similar differences in list price and value, and all are predominately 2nd homes.

We are very frustrated. We have not yet presented any offers. We don't know how to say "you are WAY out of reality" without sounding rude :)

    Bookmark   September 27, 2011 at 5:18PM
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"We have not yet presented any offers."

Make an offer at what you believe is a fair price with a short deadline (24-48 hours) to reduce the chance of the seller 'shopping' the offer.

    Bookmark   September 27, 2011 at 8:05PM
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Especially in a second home market, you might consider making an offer you consider reasonable after looking at recent comps. Be sure your realtor is armed with the comps when she conveys the offer. The worst that can happen is that the sellers say "no". It sounds like there are lots of options out there. The reason i say that is that we have a home in a market that is approximately 50% second homes and are watching the
market very closely for another property. I'm regularly seeing homes sold at 75-80% of the most recent list and cash is king in the second home market. It might take a number of tries, but might be worth the effort.

    Bookmark   September 27, 2011 at 8:06PM
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Pollopicu, you are right. It IS the banks. They interpret FHA's rules. And I guess it's my area too then Brickeyee because I'm running into the same thing with my buyers. Buyer Number Two got declined for an FHA mortgage two days before closing because the bank didn't like the agricultural zoning or the income-producing nature of the property (meaning she could give horseback riding lessons if she wanted to because my barn and arena is so nice though she wasn't going to and I never made any income on this horse farm). When I called FHA myself, they told me they had nothing against my zoning or the horse farm and said it was the way the buyer's bank was interpreting their rules. My current buyer is trying to get an FHA loan. I got shivers down my spine when I discovered that in the offer. I spoke to the loan officer and asked her to speak to the underwriters right away to make sure they didn't have anything against my property before I would go forward. This particular bank said we're all good. We'll see...

    Bookmark   September 28, 2011 at 12:20AM
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I don't think the HGTV "porn" has helped buyers expectations of a home's condition either. When you sit at home all day looking at Playboy and then go out to a bar that night looking for love, you're gonna be very disappointed.

    Bookmark   September 28, 2011 at 7:28PM
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frugalmom2, what a great analogy! Love it!

    Bookmark   September 28, 2011 at 9:23PM
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Frugalmom, that was hysterical! And true!

    Bookmark   September 28, 2011 at 11:26PM
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