Return to the Buying and Selling Homes Forum | Post a Follow-Up

 o
What are they thinking?

Posted by kats_meow (My Page) on
Sat, Feb 18, 12 at 2:50

I've been following the housing market in my area for the last couple of years -- first to sell our house and now to buy a house. We are currently under contract to buy. The market here isn't awful...but it isn't good either.

I am just baffled by many of the sellers that I see. When we had our house on the market I was constantly looking at comps, looking at feedback, trying to decide how to price, etc. We looked at the listing carefully, correcting any errors and had several pictures redone to look nice in the listing. I recognized when it didn't sell quickly that we needed to drop the price (we had followed our agent's advice which was too high) and the only debate was how much to drop the price. We did take our house off the market a few months when the listing expired but brought it back with a sharply lower price which resulted in a contract within a few days of relisting.

But...as a buyer I am just dumbfounded by so many listings. Just today I saw a house come back on the market with a new agent with a price drop of ....$0! Yes, there is a somewhat different worded listing, different pics (largely inferior to the old pics although there are more of them).

This was a house that we actually looked at and pulled comps on. It is similarly priced to other houses on the market in the subdivision, but none of them are selling. The ones in the subdivision that sold were for much less. The house just appeared clearly overpriced when we looked at it. So the sellers go to the trouble of changing agents after not selling in 6 months and have never had a price drop. What are they thinking?

I saw another house come back on the market yesterday that dropped its price by $900.

Another house was listing for a full year with only a $1 price drop in all that time. They were off the market briefly, switched agents and dropped the price $10k (not nearly enough).

We actually made an offer on a house that was somewhat overpriced and the seller made it clear they wanted a price that was very closing to listing price which we felt was way too high. So we walked. A few weeks later we found another house we liked even more (and was more reasonably priced) while the first house we offered on is no longer on the market.

I just don't get it. People certainly are free to say they don't want to sell at the current market price but if that is how they feel why are they dealing with the negatives of having to keep their house showing ready? That is, if not serious about selling, why bother at all?

I can understand being misled early on about the market price of your house. We were overpriced initially although we didn't realize it at first. But, as soon as we did we told the agent to reduce the price. Why on earth try to sell a house if you aren't willing to price it close to market price?


Follow-Up Postings:

 o
RE: What are they thinking?

It's an interesting phenomenon, isn't it? Years ago I went to look at a modest house, FSBO, located in a small community I thought I might like to live in. It had a really nasty sewer odor one could notice as soon as they walked in the door. It was an old house, cobbled up instead of correctly updated and it didn't take me long to thank the owners and make an exit. They nailed me at the door to get my feedback and I thought that being honest with them would be a kindness, so told them that even if I had felt the house would be suitable for my needs, it was grossly overpriced, and that I didn't think they'd be able to sell it to anybody until they priced it reasonably for its condition, and then it would still be hard because it was obvious their house had some serious issues.

They looked me right in the eye and told me that the price was not negotiable because that is what they 'needed' to make to purchase a particular house they wanted to buy. That argument made PERFECT sense to them. That is what you are up against. LOL.


 o
RE: What are they thinking?

Many listing agents I know are equally as frustrated with their sellers. They just can't get over the fact that the house next door sold for twice what the agent is recommending they list....back in 2005. They need $xxx to buy their perfect dream house in the next neighborhood. They know their house is worth more than the comps because they replaced this (sorry, but replacing the hot water heater is considered basic maintenance) or remodeled that (sorry, but 1990 isn't current anymore) or added that (sorry, but that ugly built-in is going to be the first thing the buyers tear out). Even if those things are legit, they may have over-improved for the neighborhood (you're never going to sell that condo for $125K in a building full of $85K condos).
Seems like the only ones reasonably priced are people who absolutely HAVE to move - job transfer, death (heirs don't care, they just want cash), disability or health reasons. Everyone else is just feeling out the market and hoping it will improve.


 o
RE: What are they thinking?

Speaking of over-priced...
The ad on this thread is Old Palm Golf Club (Florida), priced from $1.5 - $15 million. Ha!


 o
RE: What are they thinking?

What amazes me is that one on some houses I looked up real estate records online and the amount borrowed by the seller is available and the seller doesn't have to get $X. I sort of understand the person who owes $X and can't sell for that but has no funds to pay the difference. That doesn't change the market value of the house but I understand the dilemma. I truly don't understand those who can sell for the actual market value but just don't.

sorry, but that ugly built-in is going to be the first thing the buyers tear out

In the house we offered on but couldn't make a deal on the seller had a built in for a safe. You couldn't get the safe out without tearing out the built in (which was no great shakes). The sellers wanted to exclude the safe unless we paid an extra $2000 for the safe we didn't really want. Sigh...

Another thing is people not seeing the negatives of their house. On the house that only dropped $1 in a year and has not only finally come down $10k, the house is lovely. But it is on a very busy road across from a church. That doesn't help the value.

Or the very overpriced house that just switched agents with no price reduction in 6 months. It is a lovely house in many ways (not lovely enough to pay an extra 10% or so in price). However, there is no room for the freezer in the house and you have to keep it in the detached garage (most houses in the similar price range have room for the freezer in the utility room in the house. This house has a tiny utility room).


 o
RE: What are they thinking?

>The ad on this thread is Old Palm Golf Club (Florida), priced from $1.5 - $15 million. Ha!

Actually, no. That part of the market is flourishing in FL, interestingly enough. I live near Jupiter Island (about the wealthiest community in the US) and the homes there are selling for much more than they did at the height of the frenzy.

Back to the original topic, my neighbor Conchita who's looking for a place posted a similar thread a little while ago. It's just crazy.

Here is a link that might be useful: Conchita's thread


 o
RE: What are they thinking?

There's a house in my area I have been watching for a long time - and I mean a LONG time. It has been on the market for about 4 years now and is vacant. When I first noticed it, it was $399k. The interior pictures on the internet made it look like it needed a lot of cosmetic attention. We drove up to the house and looked around the exterior, and automatically ruled it out because it has a very tiny, unusable back yard, full of boulders and tree stumps and honeysuckle. It's one of these houses with a huge front yard to give the "majestic, elegant appearance" - and then it has no back yard. No thanks.

The house disappeared from the MLS one day, the sign in the yard disappeared, I figured it sold. Then 3 months later it was for sale again. New asking price - $749k! Can you believe that? A $350k INCREASE - yes, that will attract buyers! Apparently a flipper bought it - the new interior pictures showed all the cosmetics were taken care of, newly finished hardwood floors, new paint, etc - it IS beautiful on the inside now. They have since dropped the price to $699k, but this is still ridiculously overpriced.

This house keeps sitting and sitting. Unbelievable.


 o
RE: What are they thinking?

There are different markets even within the same town. Our town in CA is very desirable due to top schools. Currently there is a pretty large range in sold prices. We have a few foreclosures and some short sales - these categories tend to have some problems (condition, location or both) and they sell in the $350/sq.ft range. The nice family homes with a great lot, in good condition, that are regular sales have most recently sold in the $500/sq.ft range. Many with multiple offers and some even selling above asking!

Lots of variables to consider and it isn't as easy to decide if something is a bargain or overpriced.


 o
RE: What are they thinking?

Well, for the houses I am talking about it is easy. They are in subdivisions where there have been other sales in the same subdivision and there are other comparable subdivisions nearby. There really aren't a lot of short sales or foreclosures and that isn't what I'm comparing to. It really is easy to tell on many houses when they are overpriced since you can see what other very comparable houses sold for. Not to mention that the fact that a house hasn't sold in a significant amount of time with no price reductions is telling.

When houses have multiple offers and some above asking then, I agree, that house isn't overpriced. The houses I am talking about have been on the market at least 6 months without selling. When I was a seller and didn't have an offer within 30 days I began reassessing my selling price. I am just baffled by those sellers who don't do that and just sit there. There were houses that I saw that had had minimal price reductions and had been on and off the market with multiple agents for 2 or 3 years!


 o
RE: What are they thinking?

Cass, I see that in Sarasota all the time. Flippers are buying the run-down houses and fixing them up cosmetically then jacking up the price by $100,000+. They look nice but are overpriced. We are also afraid of what 'hasn't' been done...such as roof, plumbing, electrical.

In this area, near the water, they are buying the older, smaller 1950's block ranches and fixing them up and listing them within 2 months at the higher prices. They sell to buyers interested in renting them out. There seems to be quite a market for these houses. The market here has really improved since we started looking. Inventory is low and most sellers are being more realistic about pricing.


 o
RE: What are they thinking?

My in-laws are eyeing a neighborhood in CA with the flipper/investor issue. They buy up all the homes in short sales because they come in with an all-cash offer which nudges out the real people. In one house, the only improvement made was putting a shelf in the laundry room, then they put it back on the market $100K higher. They watch this one senior neighborhood like hawks and know every single home, and they've seen this over and over, and are bummed out because they'll have to finance, and can really only afford these homes at the distressed prices.
This is only after they sell their current home, which I'm afraid they're slipping into that mindset of how much they need to make to get into the new home, vice what the buyers market value is for their old home.


 o
RE: What are they thinking?

There is a house I've been watching because it has some interesting qualities, but it's been on the market for over two years.

I can guess why, it's at the end of an unpaved driveway that's more like a small road, it's uncomfortably close to another house (my guess is the two lots were once owned by the the same family), there's no garage and despite being technically in a desirable town, it's right on the border of a much less desirable town.

My guess is the owner is stubbornly focused on the updates (it does look beautiful inside), the yard size and the fact that it is in a desirable town. I still don't think the current price is market and I'm sort of curious to see how much longer this game will go on.


 o
RE: What are they thinking?

Funny, this trend seems to be spreading from just houses. I was just looking at the site for a woman who does renovated crystal chandeliers and wind chimes, from whom I've bought in the past. She had a fancy blingy mirror that's been on her site for well over a year, and it never sold because while I guess it's kind of cool if you like that sort of thing, it's way too expensive. So she just relisted it on her Etsy store as a new item for a hundred bucks more than the previous price.

::Shrugs::


 o
RE: What are they thinking?

Short sale houses where the buyer waits 3 months to be rejected by the bank, or worse hear nothing, then the house gets relisted $10,000 higher.

Maybe raising the price makes the house/chandelier seem more attractive!


 o
RE: What are they thinking?

When we bought our house a year and a half ago, we had a few offers on other houses rejected because the sellers just couldn't understand the market value of their houses. We made our offers bases on comps of homes that actually sold, but the sellers wouldn't move past their fantasy prices. The house we ended up buying was an estate sale, where the heirs had no ego attached to the sales price, and just wanted a quick sale at market value.

Only one of the houses we'd offered on sold, the rest were pulled of the market. Some are now coming back on for 20% less than we had offered. This is in the desirable NY suburbs where every homeowner believed they were sitting on a gold mine.


 o
RE: What are they thinking?

C9Pilot wrote"
"My in-laws are eyeing a neighborhood in CA with the flipper/investor issue. They buy up all the homes in short sales because they come in with an all-cash offer which nudges out the real people. In one house, the only improvement made was putting a shelf in the laundry room, then they put it back on the market $100K higher."

I have a hard time believing this scenario. Banks are not selling homes for $100,000 less than they are worth. Why aren't there multiple offers on these properties which would drive the sales price up closer to the real market value?
)I am assuming these are not $3 million dollar homes)


 o
RE: What are they thinking?

I don't know the answer to how/why this is happening - but it may have to do with it being a highly-sought senior community. It's about 800 homes ranging from 1100-3600sqft, so quite a range, that sold from high $200K's to $500K+ at the height of the market.
Now, the short sales are in the high-$100K's to mid-$200K's, and all the rest are in the high-$200K's to mid-$300K's, with the biggest houses perhaps higher.
So the one smaller house sold for $165K and went back on the market at $265K, however, they do tend to sit on the market for a while at the re-listed price, but not more than maybe 6 months.


 o
RE: What are they thinking?

There are a lot more people that would like to move than NEED to move. People who would like to move can afford to sit there and let the market come back up to their asking price. There is nothing wrong with those people. They have luxury of time and are in no hurry to sell at the bottom of the market.


 o
RE: What are they thinking?

"There are a lot more people that would like to move than NEED to move. People who would like to move can afford to sit there and let the market come back up to their asking price. There is nothing wrong with those people. They have luxury of time and are in no hurry to sell at the bottom of the market."

This.

There are almost always a few houses that just sit on the market, sometimes for years.

Some are 'differ net' properties, while others are just overpriced by owners who have no pressure to actually sell.


 o
RE: What are they thinking?

What is 'differ net?'


 o
RE: What are they thinking?

I get the idea that there are always a few houses that sit on the market and I understand that some people just want to sell and can afford to wait.

That said -- it isn't just a few houses that I see sitting on the market and not selling. It is a lot of them. When we sold our house (we were listed for 7 months - reduced our price during the list -- and then were off market, came back on with a lower price and sold in a few days) there were a lot of houses that didn't sell either sitting on the market for years or being pulled off after a 6 month listing. I was struck by the fact that the vast majority of listings seem to fall within those categories, not just a few of them.

Billl -- I can understand someone not wanting to sell at the bottom of the market if they don't need to. However, knowing what a pain it is to keep your house show ready all the time and to be ready to show at a moment's notice it is hard for me to fathom someone who is living in a house wanting to go through all that if there is no real interest in selling at market value. By all means, I could understand someone just not wanting to sell right now (or any time during the past few years). I just don't understand going through the trouble of listing for sale and being show ready if you aren't a serious seller (I can understand it, for example, if you don't live in the house but most of these I've noticed do have owners living there)...


 o
RE: What are they thinking?

Well, I sort of agree and sort of disagree, kats_meow. Around here, it's traditional for lots of folks to list their houses every winter tourist season at a preposterous price on the theory that you never know. Since no sane person would consider these, they don't have to worry much about being ready to show it all the time.

On the other hand, I do see exactly what you're describing. In the complex where Conchita is looking for instance, appraised values are a couple of thousand either side of 70K. Comps are mid 50s to upper 60s. Right now there are 14 units on the market there (huge development). 9 of them are listed at 114K or higher, and have been on the market long enough that it's not the serial seasonal listers.


 o
RE: What are they thinking?

Sometimes, it apparently works for a flipper. We have had an unfinished house down the street from us. The outside was nice (and brand new). When I worked the Census in 2010, I had to go to that house to verify vacancy. Anyway, I happened to go on a time that it was open for a showing. Everything inside was torn out. The fireplace surround/tile was gone. The banister was gone. Some wiring was gone, etc. They couldn't get it sold in the mid-300s. Last fall, all the sudden someone was working on it. It came back on the market at 750ish, and I think final selling was around 650. But, it sold. For hundreds of thousands more than the 2010 asking price. (also big front yard, tiny back yard.)


 o
RE: What are they thinking?

What is 'differ net?'

A typo of 'different.'


 o
RE: What are they thinking?

The flippers make money but they do put labor into some of these homes. Some are better than others.

They buy the bank owned, vacant houses at a really low price. These houses are disasters but these guys can see potential. I'm amazed at how fast they work. They rip everything out, slap in tile floors or laminate, granite counters (sometimes on old, broken cabinets), new appliances, paint and get it back on the market for approx. $100,000 profit. This all takes place in under 3 months.

The houses look like new inside until you look more closely. Many need roofs, pools look old, questionable plumbing and wiring. But they do sell. Around here, they are in desirable areas and the snow-birds are snapping them up.

Its become quite a business here. I've spoken to a few, as they let people come in while they work. They get the materials at low prices because they buy everything in bulk - sinks, cabinets, granite, tile, etc.

Jane


 o
RE: What are they thinking?

Jane, I am no expert BUT, I think the "flippers" you are seeing today in 2012 in SW Florida are a different brand of investors than the "flippers" from 2002 - 2005. Back then, when the market was sky-rocketing, many white collar investor/developers flooded the market and scooped up properties and land and overdeveloped many areas. Then they left - they just left in 2005 when the market turned, leaving behind many unfinished projects and communities. The next to leave were the consumers who purchased these homes at ultra-inflated prices who within months found themselves upside down in their mortgages. The inventory was filled with forclosures and shortsales from these homeowners, as well as empty, 1/2 completed project messes from investors, some who never stepped foot in Florida.

Many of the "flippers" today are smaller, hands on contractors that save a bundle by doing their own labor. In some ways, these flippers today are good for the area's recovery. Empty homes that sit for years in gated communities, are bad for the community, property values, HOA fees ect. These MA&PA contractors that go in, purchase, renovate, rehab, and sell these empty or rundown properties are helping in the recovery of the real estate market in that area.

There is a husband/wife team that worked this way in our modest condo community in Naples. One by one we would see them working on units that have sat empty for years. Our community is now flourishing, and our HOA fees have gone down as each unit becomes occupied. There were 2 entire buildings left empty in 2005 when the builder just picked up and left. The husband/wife would purchase a unit for maybe $80,000 and pay the back taxes, bank would pay the past condo fees, and within a month the unit would be back on the market for maybe $120,000. So, with a modest net gain, they would purchase the next. When we purchased our foreclosed unit 2 years ago, there were 35 properties in our community for sale. Now there are maybe 8. This is our vacation/retirement (4 years and counting!!) home which we rent now through the winter months to off-set the cost of running the place.

Of course, the negative to this is that individuals who desire to purchase properties may have to compete against cash-paying investors, which is why programs like the "2 week first time homebuyer" looking periods have been created.

Here's a link - of course this guy is a realtor and trying to sell properies, so his data may be biased.

Here is a link that might be useful: Naples RE Market (from an agents point of view)


 o
RE: What are they thinking?

Many of the "flippers" today are smaller, hands on contractors that save a bundle by doing their own labor. In some ways, these flippers today are good for the area's recovery.

I'm pleased this is the case where you are, traceee, but around here (Stuart area) the flipper is more likely to be Canadian investors dabbling in RE in exactly the manner urged by shows like Flip this House (in other words, the house gets a little junk that isn't an upgrade and goes back on the market at a too-high price forever), or a major investment group like Dizengoff, which is vacuuming up pretty much everything available under 100K and trying to make rentals from their purchased properties in the short term.

In either case the property remains empty and usually something of an eyesore, although to be sure HOA fees are getting paid, but I have to wonder if these folks aren't setting up a second wave of REO if prices don't recover to the extent they're banking on.


 o
RE: What are they thinking?

Like the above post says, this is a problem in many places. We have been beaten out by lower but all cash offers on 3 townhomes now. We want a place to live, these buyers are going to slap some laminate and granite in and flip the place.


 o
RE: What are they thinking?

Tinan,
And how much more is the flipper going to sell it for after only adding granite? If this is all they are doing in order to make a big profit, then I suppose the poster in another thread a little while back, that asked if she should add granite before listing her home is a no brainer...
But really, I question that this is what is happening. The free market, in a buyers market like this, just won't allow it to happen, unless the flipper is stealing the property at a very low price. And those deals are far and few between. And if that is the case, then you need to offer more than you are. Cash is king, but if you offer substantially more than they are, you will get chosen.


 o
RE: What are they thinking?

Bringing this back to the original topic -- which was not about flippers but was about regular sellers who overprice -- I originally posted:

We actually made an offer on a house that was somewhat overpriced and the seller made it clear they wanted a price that was very closing to listing price which we felt was way too high. So we walked. A few weeks later we found another house we liked even more (and was more reasonably priced) while the first house we offered on is no longer on the market.

We are soon to close on the second house but was talking to my agent today. It turns out the agent of the first house we offered on contacted her and asked if we would be interest in an offer of $X by sellers. Now -- had sellers actually made the offer of $X when we were negotiating with them it is highly likely we would have reached agreement and would have closed on that sale. Of course, we are no longer interested having found another house we like as well which was a much better financial deal. But -- the sellers didn't make that offer at the relevant time. Instead they tried to play hardball and wanted a price that was clearly not supported by the comps and, as a result, they ended up with no sale and we are ending with a different house that was priced even more favorably....


 o
RE: What are they thinking?

I'm glad you found something, kats_meow.


 o
RE: What are they thinking?

In this market, is 6 months that long of a time if you don't HAVE to sell but WANT to sell? I Want to sell and downsize, but at some point, an offer that is so low that it does not allow me to move to a decent place is just not worth it. Taking a 150K hit does not seem feasible if it only allows me 25K down on the next house. So, yes, motivation, math, and necessity are all factors people take into account.
That being said, I have noticed that those sitting on the market seem to have a flaw in location, how the house sits on a property, cleanliness, no updates to baths or kitchens yet asking the same as others that have updates, obvious smelly mold issue, and oddly added additions.


 o
RE: What are they thinking?

I'm keeping an eye on listings and sales in our relatively small resort community and saw a new listing at 849,000 not far from our house that peaked my interest. It's a duplex style town home in a small complex of about 20 units built in phases between 2006 and 2008, all units in the complex are 4/4 about 2600 sq. feet. I checked listings for other units in complex and found one other unit listed at 1,250,000. These aren't cookie cutter duplicates, but are exactly the same size 2589 and 2594 and very similar finishes, both built in 2008 and no significant location anomalies between the two. These are nice units, architectually interesting, but not really high end. Because of the big difference between the current listings, I checked for recent sales in ghe complex and found three sales in the last year at 650, 700 and 670. This tells me that priced right these will sell, but wow, what are they thinking with these listings, especially the one that is almost twice the last sale in the complex!


 o
RE: What are they thinking?

I'm looking at a nearby property that is 8 lots, one with a tiny 1/1 frame house, but is allowed to be a nursery, so it has a bunch of plants and irrigation and a big shed and stuff. A nearby big lot is for sale for $15K. $15K x 7 lots = $105K
The lot with the house is worth maybe $45K if it's not being held together with termites (it's over 50 years old, I think).

The owner is trying to sell the whole package, including his plants and clients!?! (I've never heard of this nursery and there are no signs or anything, but apparently he had a pot sale on craigslist four years ago)

Asking $299K. I'm wondering what he'll think of an offer for $150K.


 o
clarification

Black nursery pots! Not what you were thinking!

Also it looks like he's a vendor at Green Thumb every year. Maybe that's his whole business.
Can't figure out any morgtgages over maybe $130k in public record.

Anyway, I just can't figure out what he's thinking....


 o
RE: What are they thinking?

If he is selling a business, then the valuation is completly different than valuating a lot with a building. He needs to show you at least 3 years worth of P&L statements (Profit and Loss). And maybe 3 years worth of his Schedule E (tax returns)Once you know the Net Operating Income, you can perform some financial calculations to determine the Cap Rate, Cash on Cash, ROI, Debt Coverage Ratio, and other parameters.
The amount of past income and the potential amount of income that could be generated is what will determine the market value.
Are you looking at it as a business purchase?


 o
RE: What are they thinking?

Not at all.
Would like a place nearby where we could rent the house and use some yard for growing edibles (veggies, citrus, etc) and maybe even chickens. Our current yard is maxed out, front and back. So small house, big yard, and this place is perfect except asking price. Could keep our trailer there and free city mulch very close.. We could consider vacant land, but then no rental income and zoning issues with city could be a problem if no residence. Nearby lots are all small and it seems like all the good short sales are inside curvy streets, so reverse-pie shaped with big front yards and tiny backyards that we would want to use.
We don't want the "business" and I don't think there really is a business, except there sure are a lot of plants in there right now (drive by peeking through the landscape barrier), but that makes sense if he mainly just sets up a booth at Green Thumb in April. And, it's listed in residential MLS, not commercial.


 o
RE: What are they thinking?

Oh, I see. Sounds like your job now is to convince the seller that he is selling a residence and not a business.


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Buying and Selling Homes Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here