Monday, December 27, 2010

Confidence or Patience, Virtues for the Real Estate Consumer in 2011

Plenty of ink and air time about the economy is given to consumer confidence as if confidence will come charging over the hill to save us from recession or depression. Highly skilled athletes, I think, are some of the most confident people. Still, their confidence doesn't keep them from running head first into disaster from time to time. I wonder if patience might be useful as a necessary virtue and confidence could use its help. Confidence, we could say, was driving the bus when the bubble burst.

Patience allows a home buyer to rise with the tide and roll with the flow of buying a distressed sale (short sale or foreclosure) property. Patience helps the Realtor listen and learn the deepest concerns of their selling clients. Patience keeps home sellers from quitting before the miracle.
As we end 2010, we can say confidently that patience has already served us well. We've patiently weathered the first volleys of the economic storm (their may be more to come) and we've learned and adjusted to the new normal. We let go of what was not realistic (lending practices and double digit appreciation) and accepted the more prudent conservative norms.

Confidence supported by evidence is different than the confidence of wishful or grandiose thinking. Evidence based confidence is powerful when combined with patience. We now know the fundamentals of real estate sales (recent comparable sales, documented evidence of value, top condition, documented income, pre-approval in hand) have to be adheared to in order to achieve positive results. When we employ the fundamentals, we can confidently and patiently navigate the real estate economy. Try to do it with one without the other, and the journey is vicious with uncertainty.

Friday, December 3, 2010

Leaving Some Room to Negotiate

Old habits die hard and so do old ideas about pricing. The world has changed for anyone who wants to  move fbeyond offering a house for sale to collecting a check from a buyer's mortgage lender. There is a power greater than seller expectations and buyer excitement involved and I call that power lender restraint.

In 1988 the Realtor world preached pricing according to sold comparables in order to attract interest and achieve a value supported appraisal. We kept on with that mantra while the system switched gears and appraisals became rubber stamps. Eventually pricing had nothing to do with recent sales and everything to do with pricing according to exagerated asking prices.

We've been operating under the "new" guidelines for long enough to know that correctly priced homes attract attention. Evidence in the Dane County market proves that the buyers come forward and make reasonable offers on homes priced right. . If the asking price is not supported by real good and recent comparable sales your chances of negotiating on an offer are slim to none.

So, why are we leaving room to negotiate? I don't know. There is no negotiating with people who don't submit offers. Yes there are people who, regardless of the evidence, will submit offers that are lower than evidence supported fair market values. Value will always be subjective. However, if the evidence shows that an appraisal for $465,000 is impossible but $450,000 is definite, pricing at $465,000 and leaving room to negotiate is futile. It worked in 2005 but it's as out of style as a leisure suit today.

Our best chance of getting full price is pricing exactly in line with recent sales. Expecting buyer entusiasm for our property to result in substantially more dollars is an unreasonable expectation.