Watching a frenzied emotional run up in any given market is always an interesting study. Sellers think they are “making out” when their property goes off the market on the same day it was listed and buyers don’t have a chance to really take the necessary time to do their due diligence to make an informed decision. Additionally many licensees throw fuel on the fire with panic on both sides of the transaction.
A great case study would be a client from last week, well prepared with bank approval in hand and as they say in the business ‘ready, willing and able’ to buy. What could go wrong? The buyers had studied the local inventory and were sufficiently exercised to throw good paper to achieve the intended goal. Units in this spot market were quick to go ‘under agreement’; the advice was to “bring a deposit check”.
First showing was at the open house and on arrival the circus atmosphere was in full swing. Cars pulling up to the curb with people almost running to the front door. This would be quite comical if not for the seriousness of the job at hand.
Well the property was nice. Not perfect. Average really in comparison to some of the other homes in the development. Most of the windows had lost their seal and were fogged. The carpets that had not been replace were dingy. The handrail to the basement was not to code. And the yard space was less than usable (save for a small BBQ area).
Regardless, the buyers were ready to buy and thankfully to the good prior advice had a pre-printed offer in-hand only needing a signature and the presentation. With this property effectively only on the market for 1 hour, the offer was presented and further requested documents sent to the listing agent by a prompt email. Okay, place your bets! What happened? Stay tuned…
If logic were to be applied to this scenario it is unlikely the sellers would have thought that they made out. An up-side blowout does not support price. Did the listing agent do the job at hand? Was the highest price attained? Or, was it just “I got $10,000 more that my neighbor next door” and see you later? A bunch of very good questions.
Would these buyers have paid a higher price if given the opportunity to test a true support level? Only by multiple counters in a short inventory condition can the real terms to purchase be found. In the rush, many aspects of a prudent market are lost and unfortunately one of the first things to go is judgement.
The conscience of the market place also takes a beating. Faith in the process does need to be preserved to better serve all sides in a transaction. Is shortening the inspection window or telegraphing a no inspection environment beneficial to anyone? Sounds like a good road map to the courthouse to me.
Any radical movement in a market is unhealthy. Evidently the last crash did not teach very much. While the media drumbeat keeps saying that ‘we have recovered to the pre crash era’ no one seems to ask if that is a good thing? The pre crash market was as unhealthy as a market can get. Run ups without some kind of underlying economic support are nothing more than ‘musical chairs’. Some people just call it what it is, gambling. Did anyone notice that the annual GDP numbers just released last week were down?
Slow steady growth with benign corrections make an ideal environment for the purchase and sale of real estate. Predictability allows for a comfort level in making choices. But, when statistics show a 25% annual price inflation rate for residential housing anywhere you know something is a miss.
Well, no individual controls the market place and the client’s offer was rejected at full price with favorable terms. In review (as a practitioner) an opportunity to receive a counter may have better served both the buyer and the seller if time was to allow the vetting of the process. There may have been wishes or circumstances pushing the buyer forward and time for the seller to realize a higher negociated price. No one will every really know for sure other than the players in that transaction when it closes.
The obvious forces of supply and demand have the same affect in real estate as with any other commodity and when in balance there is stability to the underlying psyche of the collective market place. When this psyche is affected by irrational fear or unreasonable mania errors in judgement usually follow. Right now many spot markets have both of those factors.