To house sellers, what kind of market are we in?

In My Humble Opinion
1

The wife and I are looking to buy a house. In this down turned market, I’m lucky enough to have a stable job, savings for a down payment, good credit, and no need to sell my current residence. We’re ideal buyers. We’re coming in with no contingencies, a pre-qualified standard mortgage, and ready to close immediately.

Sellers: It’s a buyers market right now. In the area we’re shopping (pop 100,000 as part of a 2.5 million metro area) there are about 1500 homes for sale. As buyers we can afford to be picky. There are three houses for sale on your street and about 10 in your subdivision. I liked yours the best, it’s in shit shape, so it had better be priced accordingly, not at market value. Don’t tell me it’s an 8 year old roof (really 12), and “ready to rent” when it currently is in violation of rental codes (no smoke/CO/gas detectors). To the agent who won’t even respond with a counter offer, you’re “two levels” down from the golf course country club homes. You can’t set as a price comparison houses 50% larger on twice as much land. There’s a larger house a block over that’s asking 25% less than what we offered you (it’s a money pit foreclosure, and we don’t like the layout). That defines the bottom, your house doesn’t define the top. It’s small for the neighborhood. If we wanted to pay that much, we’d get any number which are larger a few streets over.

The first house we put in an offer on, which we loved, was priced at high value for the peak of the market in 2006 ($300,000). It’s been on the market since May, and had the price lowered in October to $275,000. After performing a market analysis we put in an offer which was well within the bounds of the house’s value, if on the low side, $248,000 (obviously, it’s our opening offer, we would have gone higher). This was in December. The sellers and their agent didn’t even make a counter offer. They tried to explain how fantastic the house was. We agree, the house is fantastic, but their asking price was so far above the market value that it wouldn’t make it past a lender’s appraisal.

Oh well, onto the next house.

The next house was in a better location, and seemed to be priced reasonably. After a bit of negotiation we agreed on a price in about the middle of the market analysis. So we do inspection. The house needs a new roof, a radon mediation system, a new fence, the plumbing leaks fixed, the electrical issues tracked down and corrected, the yard graded away from the house, the exterior painted, the furnace installation brought up to code, and numerous small things. All in all, somewhere in the neighborhood of $15,000 just to do the bare minimum to bring the house back up to a satisfactory maintenance level.

In this case, we’re going to be the ones to stop the negotiations. The inspection has revealed the house to be “unsatisfactory.” We really don’t want to put in the time or money (even if we get the price lowered a bit) to bring it up to condition. We don’t love the house, just like it, and the labor it’s going to take is beyond what we can give it.

My guess is the house has been haphazardly maintained for about 5 years, probably while it was a rental property. My indicator of crap home ownership? Painting over electrical outlets, light switches, and switch plates. If those corners were cut, I’m sure others were cut at lots of places we can’t see.

Since we gave up on the first house, the price has been lowered to $260,000. They’re now only a bit above the top of the market analysis, and only about 5% from where we need the price to be. Perhaps we’ll go back to them and see if they’re more willing to negotiate. My “just joking, not really” feeling is that the kids (who are probably in their 60s) are using Mom’s money to pay taxes and upkeep on the house (it’s vacant, but immaculate), but plan to take the proceeds for themselves. So they have no real incentive to execute a quick sale.

2

Sellers aren’t budging because they’re probably so far underwater that the fish don’t have eyes. Count your blessings.

3

I do sympathize with people in that position. It must be painful to know that no matter what you do, you’re going to lose. The overpriced house is owned outright, though.

4

The current market price is the price that a buyer is willing to pay intersecting with the price that a seller is willing to part with (his house) for. It’s irrelevant what the seller, or buyer, thinks it’s WORTH because without a meeting of minds, there is no sale.

I believe you should go back to Seller A now that he’s had time to digest where the market is, and put in the same offer and see what he does. In fact, I’m surprised his real estate agent hasn’t contacted you to see if you’re still interested given that you’re now within 5% of each other. But you’re wise to not be rushed or, worse, fall in love with one particular property.

P.S. Smoke/carbon/gas detectors are very cheap and easy to install. I wouldn’t let something like that get in the way of the sale. Nor would I let an 8-12 year old roof get in the way as it’s only halfway through its expected life.

5

We listed our home a year ago this month. After 6 months of people thinking we needed to sell for some financial reason (payments are and were current) and trying to negotiate a lower price, we took it off the market. The only people who looked at our home were “just looking a-holes” or the “we want a real deal” a-holes. It should be a good time to buy a home, but it’s also a time to be careful of neglected properties offered cheap. If you find a nice,well maintained home that you want to live in for the next 10 years, buy the damn thing and don’t sweat the few extra dollars it costs. YMMV. etc.

6

I’d wait a bit longer and put in a lower bid, because I’m just like that. :slight_smile:

OP, I’m right there with you. People who want unrealistic money for their houses and aren’t willing to negotiate are kind of annoying, but it’s a minor pain, since it sounds like you’re going about this the right way - offering what YOU think it’s worth, and not falling in love with houses. Unrealistic sellers will get a wake-up sooner or later, or they’ll luck into a sucker.

Good luck with the search!

7

Maybe some of these people have bad realtors.

I’m trying to sell our house in Kansas City, which I’ve been renting out for a year and a half now. I had two realtors look at it and give me an assessment. The first came back with a suggested asking price of $145,000, which is what it was listed at when we bought it in 2006. His comparables were all several miles away, and many of them were built in the last decade. My house is almost 35 years old.

The second realtor suggested a price somewhere between $120,000-130,000, closer to 130 if we made some improvements. Her comparables are all within a mile radius, and are comprised mostly of foreclosures and short sales, many of which are listed at between $50,000 and $90,000.

Since I have a tenant in there until May and, based on how she interacted with both realtors, she’s not going to be very cooperative when it comes to sprucing up the place for showings, I’ve decided to hold off until she’s out to put it on the market. And I’m going to go with the second realtor and price it lower than I think it’s worth, probably, because I just need to get rid of it already. But I’m sure that first realtor has convinced more than one seller that the market is a lot rosier than it actually is, and maybe the sellers you’ve encountered have a similar mindset.

8

Sounds like it’s not as much of a buyer’s market where you’re looking as you thought it was.

9

Yeah, I’ve been pretty excited about the recent sales in my neighborhood. Sellers are finally starting to actually get market value for their homes. A good friend of mine just sold a house that he bought 5 years ago and made money on it!

10

The agent did contact our agent. I think we will get back. My vindictive side wants to say, “since our original offer, interest rates have gone up, so here’s the new lower offer.” The big issue with that one is they are still above the maximum price we can afford. So, the question is, are they willing to come down, because we can’t go up.

11

That I totally get. There would have been a price you could have gone down to, at which somebody would have bought your home (as PunditLisa alludes to). That price was below what you were willing to sell for, so you pulled the house. There might have been somebody out there willing to pay what you wanted, but in 6 months you didn’t find them. That’s exactly why I plan to rent my condo when we move. I’d rather sell it, but not at the price I’d have to lower it to to guarantee a sale. The rental market here is pretty hot, so I plan to just do the landlord thing for a few years, and then sell, or keep renting if it goes well (it won’t…)

12

That is completely possible. Though both houses we’ve made offers on have been on the market for over 6 months.

13

Oh yeah, an 8-12 year old roof should only be half way through it’s life cycle. This one, however, was at it’s end. The roof inspector wouldn’t certify it for 5 years, and hesitated to say it would even last 3. Some things, like the area around the chimney need to be taken care of immediately. Not just replacing the flashing, but installing a cricket to prevent a valley where water/raccoons collect. There are currently water stains in the attic and garage, but probably due to our dry climate, no serious damage yet.

It’s no particular little thing. Including travel time, the smoke detectors would take $30 and an hour to fix. It’s the number of minor things that’s the problem. Every thing we looked at had just a few minor problems, while some things had some major problems. Still nothing really insurmountable, for somebody who wants to take it on. For us, it would have meant living in a dump for a few years while we saved the money to get non-critical things fixed. After $10-15,000 to fix the critical things.

14

Moving thread from The BBQ Pit to IMHO.

15

Which seems to imply that there is no urgency on their part. We know an older person near us who put her house on the market, let it sit for a while, and then took it off.
You need to find someone who has some relatively urgent need to sell, perhaps because of a job move. With prices stabilizing, or even increasing slightly, those without have an incentive to hold out.
However, I’m kind of surprised this is in the Pit.It may be annoying, but people unrealistic about setting a selling price either don’t care or are going to suffer more than a potential buyer, who still has lots of options. There might be more of an Endowment Effect thing going on here than usual.

16

I think pricing houses is harder than it used to be. When we refinanced the assessment came in a bit low because lots of foreclosures were included. Since it was still well above where we needed it to be we didn’t care, but recent sales of comparable houses are closer to what we expected than what we got. I think foreclosures may not be truly comparable since the psychology of the seller is very different from that of a normal sale. They will drive down all prices, but that is reflected in the price of non-foreclosed sales, so you might have gotten a double hit from Realtor 2. But no one has experience in this type of market.

17

Just for the record, I wrote this as it was being moved. Great minds, etc…

18

Thanks, I was really debating where to put it. I figured my OP was maybe ranty enough for the pit, but unless people really tore into me about having unreal expectations it was more IMHO material.

19

This is exactly the case of the overpriced home. The owner is elderly (like I said, her kids are probably in their 60s). She’s not living in the house, and between taxes and upkeep probably only paying $2500-5000/year to keep the house. In that situation it is reasonable to keep the house on the market longer at a higher price.

The poor condition house is a bit different. In that case it’s years of neglect and shoddy workmanship coming back to bite the owners in the ass. Five yeas ago the house would have sold in weeks based on location alone, regardless of the problems.

20

I just found out, both houses are being sold by lawyers. The expensive house’s sale is being handled by the son, who’s a lawyer, and the shoddy house is owned by a lawyer. I have no idea if that means anything, but it is an interesting coincidence.