Monday, December 7, 2020 / by Vanessa Saunders
Being in real estate, you might say I’m an optimistic person. Even though current world events terrify me, pessimism isn’t something that comes naturally to me. Even my company’s theme song is “Always look on the bright side of life!*” I’m naturally enthusiastic, my clients, fellow Realtors, and even my husband often tell me. However, enthusiasm can so easily morph into optimism, and optimism, especially in the current real estate market, can quickly become downright dishonest.
In real estate, if your client is naive, desperate, or just plain greedy, it’s easy to be tempted into (real estate terminology alert here,) a “puffing*” scenario. This is where the players “elaborate” on the truth. In this case, I’m talking about property value. But, being the consummate professional that you are, and I’m talking to my peers here, YOU really wouldn’t stoop to that level. Would you? No! To do so would not only be unethical, but it’s also brutal on one’s self-esteem. (I don’t know about you, but I like to sleep at night.)
After all is said and done, having done everything it takes, (especially during a pandemic) to actually meet (in safety, after all the parameters are met to do so,) with potential sellers in their home, is priceless. Even more so in our current flaming red-hot market, where listings are so scarce, they are like GOLD to Realtors. After touring their home, you sit down together to answer the million-dollar question. How much? You patiently and professionally go through the situation, using the all-important comps* explaining as you go, the research involved to make multiple adjustments and come up with a well-considered price range. Finally, you confirm that your deeply considered price range is spot on. You hear the sharp intake of breath from the sellers who are astounded by your findings. “It’s much too low!” They exclaim, often with a litany of justifications as to why. But at the end of your presentation, it doesn’t matter. You’ve done your job. The seller just wants more.
What do you do? Yes, YOU. The professional Realtor, and very possibly a certified PSA (Pricing Strategy Advisor.) You, who knows darned well that if it’s priced right, it will sell. And, (in this market) done right, for even more than you are suggesting. But let’s be honest here. For a home to sell in any market if a mortgage is involved, then it will need to appraise at the agreed-upon price and terms. Right? You get the concept, most do, but when the media is screaming “Homes Selling Hundreds of Thousands of Dollars Above List Price! It’s only natural for the homeowner (whose home is always better than everyone else’s,) to Just. Want. More. “Price it higher and find a cash buyer!” Is today’s seller’s mantra. So do you walk away, or just say OK?
But where does that leave the buyers?
If you are a buyer, you’ve already made several attempts to purchase a home, spending hours upon hours online looking for the seemingly impossible, your dream home. If, and that’s a big IF, you are successful, you’ll likely end up with more than you can really afford comfortably, and no, it’s not your dream home. More a stop-gap to take advantage of the amazing historic low-interest rates, designed to get you on the homeownership bandwagon. To get to the point of no return you’ll have traveled further and further away from your target area, the area where you have friends, perhaps family, most certainly the area you’ve researched inside out. You’ve spent days, weekends, weeks, and sometimes even months, sometimes even swapping agents in the (false) hope one will know of some new property that the others don’t know about*. Braving Open Houses packed with other (hopefully Covid free) mask-wearing, hand sanitized lookers. How many times have you wondered if you are insane to put yourself and loved ones at so much risk?
As offer after offer doesn’t even make it to the shortlist, or you’re beaten to the coveted “Accepted Offer'' status by someone else’s cash, you’ve started digging deeper and deeper into your savings, convincing yourself that the new furniture will have to wait. You’ve even swallowed your pride and called rich Uncle Joe to help out, but you still can’t make it to the closing table. Is it all worth it? Likely not if you aren’t a cash buyer. And, even if you are able to end up winning the proverbial bidding war, it’s likely that the property you do end up with won’t be your forever home, the home of your dreams.
This crazy market makes people overlook logic and the once important things. You’ve settled for less, or worse, but you won the bidding war. Now your gut is telling you something is wrong. Isn’t that something your professional consultant, your Realtor should have, could have, would have done? Maybe they did, so you found someone else, who maybe should have done more than just opened doors. Buyers deserve to know what the comps say, they also need to take a step back and listen to reason, or at the very least ask questions. If you don’t end up with the home of your dreams and have just settled, what will the market do next year or the year after? Perhaps you’re going to want to sell this one and find that dream home by then, but maybe you’ll be left holding a lemon! One thing’s for sure, don’t despair if you haven’t been able to secure the house of your dreams at this time. A favorite saying of mine is, “If it wasn’t meant to be, then it’s for a good reason.”
So, how much is too much? When it comes at a price. If both you and your client can’t detect bullshit or are “blinded by the light”, then that is optimism at its worst. The escalation clause* springs immediately into my mind. The current world depresses me, and there’s truly a lot of stuff that sucks right now. Fake smiles, fake enthusiasm, fake affordability, escalation clauses. Besides that, a lot of things are undeniably wrong right now. However, we really don’t have to be bullshitters, even to ourselves. In fact, we all need to be better than ever. Remorselessly clear about what we can’t control, and (genuinely) enthusiastic about what we can. Even if no-one wants to listen, at least you’ll sleep better a night.
*Puffing Definition: The term puffing refers to “extravagant claims made by sellers in order to attract buyers.” In plain terms, puffing is an exaggeration of a fact. Many people including real estate agents are guilty of puffing.
*Comps = Comparative sales https://www.investopedia.com/terms/s/sales-comparison-approach.asp
Multiple Agents (MLS members all have the same information available, updated every 5 minutes, whereas buyers who look at the national portals Zillow et al., may have to wait longer as the sheer numbers of listings nationally lag behind.)
Always look on the bright side of life. https://www.youtube.com/watch?v=B5TsJ_bKBoc
Escalation clauses are a tactic used by some buyers to make their offer more appealing and ensure the seller will choose their offer. It might sound like a good idea for a buyer trying to win in a bidding war and an even better idea for the seller looking for the highest sales price.