In a recent comment thread, Reno Ignoramus referenced my 96% sale-to-list price ratio when representing buyers. This is a number I published some time ago on my website. Honestly I haven’t updated this figure in quite a while, but based on my latest fishing expeditions with clients, I knew it had to be lower at this point. So I went back through my first quarter resale buy-side closings for the year. These days I’m down to 92% on sale-to-list ratio.
Just so you know, I don’t make willy-nilly lowball offers with clients, because they’re generally a waste of time. What I do is assess each situation strategically on a case-by-case basis. When submitting a lower-than-asking offer, I thoroughly research the situation: talk to the other agent, google the owners, discern the seller’s motivation, run a property history to determine true time on the market, ask about showing activity, find out the results of other offers if there were any, and ask about seller financial constraints, etc.
Then I write a detailed cover letter to submit with the offer that includes market statistics, comparable sales and industry trends that support the price we’re offering. I present the buyers as good people who will take care of the property, but I also introduce the seeds of doubt, based on current market conditions, as to whether or not they’ll ever sell the property. Again, market data is key here. The object is to submit the lowest possible offer, yet still get them to talk back.
Sometimes, this strategy works miraculously, and the sellers just accept. This is most exciting for first-time buyers who can save $30K, just for asking. That’s a year’s salary for some! But even when you knock off $50K for a seasoned client, that can still mean a giant plasma TV, a new kitchen, a whole lot of decorating or a year’s college tuition and expenses. Saving clients big money is my personal holy grail as a buyer’s agent.
But not every offer ends in success. Sometimes the sellers just aren’t ready to participate. They haven’t been on the market long enough, their price expectations far exceed the reality of the market, or they themselves are just fishing to see what they can get. Sometimes you get into a multiple bidding situation with a foreclosure, and the bank ends up selecting a competing party based on their down payment, their credit score or the fact that the listing broker brought the buyer so the bank can further cut the total commission and thus save money. Once in a while, a seller doesn’t respond, so you just move on.
Some homes are extremely well-priced and warrant a full-priced offer. Others are priced okay, but the buyers are less emotionally attached in an unsettled environment, so they offer what they think the property is worth based on market dynamics. Many more properties (90% of them in Reno-Sparks) are currently overpriced and just won’t sell any time soon. That’s the reality of today’s market.
Key to being a good Realtor is decoding the buyer mindset. Love the house? Must have it? Then be aggressive for as little as possible. Not sure? Like it but don’t want to overpay? Throw something at the wall. If it sticks, it’s destiny. If not, we’ll find something better. These are the kinds of conversations I have with buyers every day. But the one thing to remember about offering less is that if you don’t try, you’ll never know.
Deceleration brings instability, in physics as in markets. I think we need to be alert and flexible as professionals to make the most of an uncertain environment.
NAS
Diane-good commentary. I think an experienced agent armed with current data, fine-tuned marketing skills, all combined with some seller grief counselling has a chance of pushing a deal through.
Every home and owner has a story to tell. In this market, the seller’s ending isn’t going to be what they had envisioned. Evaporating equity spiraling toward loan balances is my definition of a nightmare. Choices? Ride it out, cut and run, or plow on into default.
At present, as a potential buyer in the area, any offer having my
signature is going to be a “low-ball.” This is due to the simple fact of an over-inflated market and the sellers are hanging onto some very outdated comps and expectations.
There is a listing on Dove Mountain for 1.350M. Zillow’s mean is
717K. Another listing on Dakota Ridge is listing for 1.150M.
Zillow’s mean is 840K. I don’t consider Zillow the Holy Grail
for R.E. but a reality check is in order.
DERRICK
Zillow? LOL. Yea accordging to zillow.com my house in sonoma county went up 73,000 in the last month up to 1,390,000. also My wifes place in keywest fl went up 27k this past month.. Zillow is harldy a barometer of the current market situation nor direction. that being said I agree some buyers clearly are living in lala land with their heavily inflated prices which in all reality they will never see. that is true, however you cant discount the fact that there are also many buyers out there offering such lowball offers that they too have unrealistic expectations.
NAS
I stand corrected. One of the properties on Dove Mountain popped
up in the http://www.foreclosure.com site. Not a big surprise, but the developer is listed. Oh Oh.
Reno Ignoramus
Another very interesting piece of information Diane. Another poster on a recent thread said that he thought sellers were now taking less than 96%. He put it at 92%-93%, which is where you are. Given the still absurd asking price of many (most) sellers, however, 92% of asking still is absurd.
Absurdity – 8% = still absurdity.
To follow up with Guy’s post about vacant houses. Take 60 seconds and go to the MLS link and search West-Southwest. This is basically Caughlin Ranch. Look at just the first 10 listings. Six of them are vacant.
Diane Cohn
So far in April the MLS average is 96.10% throughout Reno-Sparks.
Grand Wazoo
Interesting – if you go by the interior pictures of the five properties on Dove Mountain Ct. listed in MLS, all five appear to be empty.
NVMojo
I like what you posted here, Diane. Thanks!
MikeZ
Reno Q1 data is in: http://tinyurl.com/2fk57r (RGJ.com)
YOY median price is down another 9%, sales are down to 830 per quarter, standing inventory is at 3,400, more than a year’s worth of unsold houses.
Of course, the RGJ headline begins with: “As home prices go up…”.