Market Casualties II

I truly thought I was the only one hobbling around with "boo-boo's" from the market until I read Susan Pruden's blog entry about failed offers.  Evidently the market in Susan's area is similar to the market in the Minneapolis St. Paul area.

When the market first started to slow and houses began to clog the system, agents began the litany, "We want buyers.  Buyers in this market are a guaranteed sale."  The litany lasted for a few weeks until a weird trend started to materialize.  Buyers were not buying!  They had the inventory of the century and they were not buying!  When they did buy, a greater number were cancelling their offers based on contingencies.

What agents are experiencing is unusual, but to be expected.  When there was little inventory, buyers had to be decisive about choosing a home.  Waiting even an hour meant the house was sold to another party.  Buyers knew this and the limited inventory created an auction mentality.  If the house was even mildly acceptable, buyers made a bid.  They didn't wait.  They paid more than the list price.  They didn't ask for inspections.  They were desperate to get the house at all costs!

Today's market has changed.   Large inventory provides a multitude of choices.  The buyers are demanding more concessions or they will move on to the next house.  Not all sellers have adjusted to the change.

• Buyers with houses to sell either have to sell first and then buy or be able to qualify for financing two homes.  Most buyers want to sell first.  When their homes go on the market, they are excited and expect a purchase agreement.  In their minds, their house is the only house on the market.  They shop for a home and find their dream.  A contingency for the sale of the buyer's house is written in the offer, but the buyer's house doesn't sell.  The purchase agreement is cancelled and both parties are disappointed.
• Buyers know there is a lot of inventory, and they want to get just the right house.  Consequently they shop and shop until they find the perfect house.  To quote a previous blog entry, "There is no perfect house, even in new construction."  However, today's buyer knows that there are several houses on the market for each buyer.  They are no longer experiencing the auction pressure to buy.  They want to think about each house before an offer is made which is extending the market time.
• More and more buyers are walking away from a house after an offer because the seller is unwilling to make the requested repairs from the private home inspection.  If the seller is unwilling to make the repairs, the buyer knows other houses are available.
• Sellers are sometimes accepting offers that are more questionable because they are desperate to sell and the weak offer is the only one.  Shaky offers may fall apart before closing.

The final thought for the craziness of real estate sales in this market is to remember the house is not sold until the deeds are signed and the money is paid.  Put more bluntly:  "It ain't over until the REALTOR® sings!"

(c) Bonnie Erickson 2006

Comments

[Gene Molloy]

August 8, 2006

It seems to be a trend that is sweeping the nation. I am working with an ultimately cash buyer right now. His house, a fixer upper in a trendy neighborhood, was purchased by a rehabber. He can close his sale anytime now. He has targeted three acceptable homes and actually wanted me to write the identical offer on all three. I slowed him down on that thought, just in case all three sellers were as motivated as they should be, if they really want to sell the properties in this market. Offer #1 was countered with "take the house to close contingency off and give us more money". My buyer reply was "thank them for considering our offer, but no thank you". I am going to get together with them tonight to write an offer on house #2.

[Maureen McCabe]

August 8, 2006

I had a listing earlier this year in an area with 17 months supply of houses. The seller was a friend.... so I was surprised that she bought a condo with out me "by accident." She was ready to close on her condo quick. I don't think I told her there were 17 months supply of houses on the market because I was afraid she'd freak....but I showed her all the competition, I just didn't do all the math, bar graphs, pie charts... we put the house on the market in late December. We got the first offer in about 10 days. A good offer, we countered back and forth and the buyer walked. The seller had second thoughts about 24 hours later. Too late the buyer had negotiated with a motivated seller. We went in contract about a buyer about a month later, even better price. That buyer disappeared based on their home inspection but there was nothing big on the home inspection... buyer three did the same thing... seller had an engineer come over and inspect the house. Seller did a few repairs. A month or so later buyer four bought the house although their house was not yet sold. Buyer four bought the house at the original price that buyer one offered! Ouch. Ouch. Ouch. Ouch.