The sun came up again, our new MLS system is still with us, and Steve has a shiny new computer. Two out of three aint so bad. As Steve began what would be a four hour phone conversation with tech support Sunday, my little Pollyanna declared, “They’re going to fix it!” This was my cue to immediately set about digging through the home office drawers in search of his system restore disks. Sometimes I just hate being right. I have learned that tech support’s solution to virtually every problem involves wiping the hard drive and starting over. This time, however, the system restore disks were not even enough to undo the damage.
Now that Steve is again interconnected, I can turn my attention to more pressing matters — Wasting time.
This week, I am finally convinced the world has gone mad. My shredder is working overtime. Imagine you spend three days in the new car show room. You take multiple test drives, you spend many torturous hours sitting in a little cubicle waiting for the salesman to get his manager’s approval on your offer, you fill out the financing papers, and finally, just as the arm is extended holding the keys to your new wheels, you grab your stuff and go home. “Gotcha! Just kidding! I don’t like it. I want a blue one.”
Wasting time. That is what I am mostly doing these days. Last week, I wasted time negotiating multiple offers on a home, multiple offers which each vaporized in rapid succession at the very moment of seller acceptance. Meanwhile, Steve was also wasting time on another offer. Upon acceptance of this one by the seller, the buyers decided they needed to see the home “one more time.” After 48 hours of no return phone calls from the buyer’s agent, he was finally told they had changed their minds.
Today, I will be wasting time in another way. I get to partition a few hours out of my day to deal in good faith with a buyer who has submitted an offer which appears to be missing a couple of digits. I want to believe they were using scientific notation, but I suspect otherwise.
I am seeing too many home-shopping hobbyists these days, writing offers for sport, only wanting what they can’t have, and only finding victory in rejection. If you reject my offer, then you are a seller unrealistic about pricing, and I have established my superiority. If you accept my offer, then I must have offered too much, so I will reject you.
In each of these situations, however, the playthings are well-intended people, people wanting to sell their home. Offers, both serious and frivolous, must be presented, each time requiring the sellers and their agents to spent many quality hours together thoughtfully discussing the contractual nuances and the implications and crafting a response. During the downtime, once the counter offer has been returned to sender, the sellers are emotionally scheduling the moving truck. They are making plans, and they are doing so because, through your offer, you have given affirmative notice that you have more than a passing interest in purchasing their home.
These are challenging times for sellers and their agents. Market times are long and prices are down. Buyers are plentiful, but serious buyers are few. Having been stung by the rollercoaster ride of the past few years, buyers are tentative. This is understandable, but please don’t use the offer and negotiation process as a test drive. The moment of offer acceptance is not the time to determine in earnest whether you like the home enough to make the purchase.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 12 comments… read them below or add one }
Perhaps you need to be more realistic with sellers? If you are getting lots of low ball offers, just maybe they are asking too much. Sellers may have a hard time with this, but what the house was worth in easy-money 2005 is meaningless. Now that financing is grounded in reality again, fundamentals matter. Like the cost of owning verses renting can’t be 2x. It’s not the entire market that is dead. Properties ARE moving. There are still lots of buyers out there for non-inflated houses. I’ve watched inventory shrink dramatically in places like Mira Mesa, Clairemont, that have plenty of bank owned properties whose sellers are not afraid to mark their properties to market.
Perhaps, just perhaps, you are pricing too high.
Here is the curious thing, Jakob. With the one exception I mentioned, all of the offers have been at or near full-price. (For the record, these listings were priced correctly, which is why the offers were strong.)
If the listings were indeed priced correctly, then the houses would have sold. The buyers almost certainly backed out because they felt they were paying too much. If they felt it was a good deal, they likely wouldn’t have backed out. That said, almost all the prognosticators are expecting another price decline of at least 10% through 2008 in the San Diego market. Buyers take this into account, and if they don’t think they are getting a good deal now, they are unlikely to follow through with the purchase of an asset that is going to significantly fall in value over the next couple years.
You are missing the point, Chester. You have to get yourself into something in order to back out of it. If I am willing to pay X at 10:00, how is it that I suddenly am not at 10:30? Contracts are taken too lightly, and I don’t see as many good faith negotiations taking place. I have no issue with buyer reluctance or market jitters. But, once you decide to make an offer, unless you discover physical fatal flaws during investigation, stand behind it. The pervasive wisdom seems to be that if the seller accepts my price, I goofed and offered too much. Comp it, kick the tires, and commit first. Negotiate afterwards.
Chester — With all due respect, your view is simplistic. When there are 10 homes just like it, and all priced within 1-2% of each other, it’s not price driving the choice at that point. It’s all the other little subjective biases held by the buyers.
Something tells me this isn’t Kris’s first rodeo.
Yes, this “just kidding” attitude on the part of many buyers these days, manifests itself in another form: let’s try to take advantage of the sellers right after the home inspection, by asking for thousands of dollars in repair credit (heck, who cares if it’s justified). This variation is played by the “serial” house negotiator who doesn’t mind losing money on inspection fees. It’s the “thrill”.
My main point was about pricing, and generally the simplest explanation is the correct one. If the homes were priced right they’d sell. That seems pretty obvious.
As for why people walk away from offers, it seems silly to complain about it. For whatever reason, the state laws and contracts provide the opportunity for a buyer to walk away for any reason during the first 17 days. As a buyer in this market, it makes no sense to go through with the deal if you arent getting the best deal possible. The laws provide the buyer with the opportunity during the first 17 days to make certain they are getting a good deal. So naturally people adapt to the laws and use this time period as the laws are intended.
Plus, almost all prognosticators predict that housing will fall at least another 10% in San Diego over the next year. And no one (even the most optimistic) expects it to rise over the next 2-3 years. So, unless a buyer is getting a really good deal, it doesn’t make sense to go through with the deal. This is especially true with home inspections, as they can greatly alter whether a deal for a buyer is a good one or a bad one.
One other reason why you might be seeing this behavior, is that buyers tend to look at multiple properties and are trying to see which seller will give them the best deal. For example, it is likely when we buy we will place multiple simultaneous offers on a handful of houses. We will then see what the counter offers are, and then determine which house, if any, we want to finalize the contract on. This seems to be the most effective way to determine which sellers are serious about selling their house and which are not. After separating the wheat from the chaff, you then finalize the contract on the house with the best deal.
Chester,
What Kris is saying to you, but in this post I’m going to use MY words, is that just because you have the right to do something, doesn’t mean you should.
I can go into a retail store, bargain, question, negotiate, investigate all I want. But if I’m just doing it to see what happens, and not because I really want that HD TV, then I am simply an inconsiderate sop.
Of course buyers not only have, but deserve to exercise, their safeguards when buying. Those of us who love what we do, love those protections. Yet simple reflection, and then action taken only when that reflection is finished, is what we are calling for here.
I’m pretty old fashioned, and as both a buyer and seller of homes myself, I can tell you that I appreciate a man who looks over the horse, checks his hooves and mane, and then either walks away with a tip of the hat, or puts down his money. In the old West, anyone who played one rancher against the next was no one to be admired, nor trusted, nor liked.
It’s not “silly to walk away” from a deal, but often it’s “just not right”. (See Danny Glover’s character in “Silverado”, a great western because it’s about great character).
Don -
Thank you. That is precisely what I was trying to say!
Don,
Just to make it clear, I am not talking about people making offers just for the sport of it. And I agree that someone who completely wastes a salesmans time in such manner is a jerk. However, I highly doubt this is occurring in the housing industry any more than it is occurring to HDTV salesmen. People largely don’t make offers just for sport. I think you should recognize that it is highly highly improbable that the people making offers on your houses are doing so simply for sport.
Rather, it is more likely the phenomen you are witnessing is simply buyers are investigating the home during the 17 period as they are supposed to, and recognizing that it is a bad deal. This is what the period is intended for.
Also, I to am old fashioned. But to claim, that back in the olden days, people didn’t play deals off one another is a load of hogwash. It has always happened and always will. Are you telling me you never walked into Best Buy and asked them to match Circuit Cities price on a TV you are looking at? Are you telling me you have never represented a seller, who received multiple offers and then asked the offerers to up their price to match the other offer as opposed to simply accepting one of the offers?
Kris, first you are a very good writer. I’ve been reading your blog for a few months now, along with Jim Klinge’s, almost daily.
I can better understand making a low-ball offer than a full price offer and walking away. That has got to be very frustrating for you and Steve: I’ve worked on a contingent fee basis for many years so I think I fully understand your frustration.
I very well could be wrong, but I think home prices still have a ways to go: lower. For all the reasons we all know, i.e., tougher credit, price/rent ratios, income/debt ratios, increasing fuel/food costs, unemployment inching up, popping of tulipmania with respect to home as a commodity.
I live out of state but have a small home in PQ. My wife and I come out here fairly often. The home here is too small for my wife and four youngish kids so we stay in Colorado. We like Colorado and we like SD. Sometimes we think of moving, hence my review of your blog often. I haven’t been here for a few months so I was surprised at the cost of gas. I knew it was high, but it is quite a bit higher than in Denver. My wife just got back from Vons: eggs, milk and everything else seem higher. But we love the weather and the people out here. People seem to be a bit more outgoing and friendly than in Colorado. People are nice in Colo but in many areas you get the more reserved midwest personalities; cordial, but often reserved.
So, we will watch. We may or may not move. I own a four-year old 6,200 s.f. home on 1 acre that is 20 minutes from downtown denver. I don’t need tha big of a home and probably would just as soon have a smaller one: more to clean and more room for kid junk. I drove around Pacific Highlands area yesterday. I like the homes there, and the locaton, but am I really wanting to move to such a smaller home on such a tiny lot….maybe. I think I will wait and see what happens over the course of the 12 to 18 months. Just not motivated and the charts like the one on reset rates on bubbleinfo.com scares me and keeps me on the sidelines.
But as I mull over these issues I feel like you help to educate this out of state potential buyer.
John
John, Thank you so much for taking the time to comment and, of course, for visiting. You will get no arguments from Steve or me on your opinion that we are still facing some months of “correction.” (Doesn’t that seem like a much nicer word than “decline”?) We say it here, and we share this sentiment with our clients. How much and for how long remain the real questions. I think we are getting close, and 12 months feels about right.
People purchase homes for all sorts of reasons, and the fact that you do not NEED to make a move puts you in an enviable position. There are two cautionary notes we repeat often, however. For buyers, too much paralysis could result in missing the holy grail of the market bottom. Close enough is close enough if you plan on enjoying the property for a few years or more. For sellers, waiting for the rebound is only advisable if you are good for the same few years. While we will no doubt see further correction (there’s that word again), resign your equity to the dead money drawer for the three to five years if you wait, because that is how long I suspect it will take for you to be in a position to outperform today.
Colorado – There are worse places to live.