What is a Buyer's Market Anyway?

By
Real Estate Broker/Owner with J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY

Now is a great time to buy real estate. I was quoted 3.75% on a 7/1 ARM today (great if you are putting a lot down and plan to move in 5 years or less), and 30 year fixed are getting deliciously close to 5%. The high inventory and low prices are all in the buyer's favor. I see homes off 25-30% from their peak in some very nice areas, and even more in some parts. Sellers want to make a deal too, and I am seeing them do things they never would have done even 2 years ago: include furniture, help with closing costs, eating the difference in low appraisals, and even agree to significant repairs. All this points to a strong buyer's market. 

Yet some buyers are frustrated. Why? Because all this talk in the media has them thinking that if they offer $400,000 on a gorgeous $500,000 home in a prime location that the seller will fall down and kiss their feet! Worse, when someone outbids them for that gorgeous, well appointed home in a prime location they are perplexed! Prices are down 50% in Shamokin! I should be able to get something in White Plains or Scarsdale for 25% off! Isn't a buyer's market a license to steal?

 

Of course it isn't. A buyer's market isn't a flea market. That $500,000 house was selling for $650,000 4 years ago. That's your discount. If I am your buyer agent, you might get it for $460,000 or $475,000. And the seller may throw in the deck furniture, the snow blower and the breakfront you liked. But a market, by its very definition, is not where theft occurs. It is only a good deal if the seller goes for it. And until we are able to hypnotize the seller, their agent, their lawyer and Uncle Vinny, you aren't gonna raid the neighborhood like an invading Visigoth. 

Moreover, in those perplexing cases where you are outbid, you have to understand that if you adore a fantastic place that is aggressively priced, then someone else will probably love it too! Hot properties still have a larger audience. So happy househunting for you brave, smart people out there actually looking in earnest, and do remember that a buyer's market is distinct from a hold up.  

 

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Gene perez 11/20/2009 01:57 PM
  2. Sandy McAlpine 11/21/2009 09:12 AM
  3. Vanessa Stalets 11/21/2009 09:57 PM
  4. John Occhi 11/22/2009 07:52 PM
  5. Sharon Sapp 11/23/2009 10:32 AM
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Show All Comments
Rainer
146,725
Gary Pike
Better Homes and Gardens Real Estate Metro Brokers - Powder Springs, GA

Great post.  I have experienced someone trying to "steal" one of my listings.  I wouldn't go so far as to just blame the buyer though, there are agents out there informing buyer's to low ball properties thinking they will be heros if something actually goes through.  They waste a lot of time and money not informing their client of how things really are.

November 21, 2009 06:39 AM #47
Anonymous
Anonymous
Cindy Berenbaum

Thank you Phil for your GREAT post!  To some a buyer's market means getting the property way below asking price, just the same way some look at a home inspection report as meaning EVERYTHING on the report gets taken care of!!  Education, education, education!  We have to educate our clients and try and teach them "the rules" of "the game".

November 21, 2009 06:56 AM #48
Rainer
153,922
Steven Connor
REALTY ONE GROUP - Gilbert, AZ

Sometimes they have to lose a few homes to realize that they need to offer closer to list price rather than lowballing every home "just to see what the seller does".

November 21, 2009 08:51 AM #49
Rainmaker
194,622
Sandy McAlpine
McAlpine Properties - Cornelius, NC
Search Lake Norman Homes For Sale - Lake Norman NC

You made some fabulous points here. I have had to re-educate buyers in my market about hot waterfront inventory and that they aren't going to get a hot property for 50% off. I re-blogged your post!

November 21, 2009 09:13 AM #50
Rainmaker
174,320
Susan Thompson-Solomons
The McNelis Group, LLC - Solomons, MD
MD Real Estate

The market has been showing a shift in the past few months, but buyers just don't seem to be getting it. Inventory is down, and nice inventory down even further. Buyers need to know that sellers are still reluctant to put their homes on the market because prices, although more stable, have not improved enough, so if they find a nice property, they need to offer a fair price. The market is not tumbling anymore - sellers have more than done their share - buyers are more than likely going to lose a nice home if they don't change their mindset.

November 21, 2009 09:26 AM #51
Anonymous
Anonymous
Michelle Silverman

Great post. Your message was right on! As Realtors it is our job to educate the buyers on what is realitic and what is not! A great deal only happens when both Seller & Buyer agree!

November 21, 2009 09:56 AM #52
Ambassador
1,009,530
Karen Fiddler, Broker/Realtor
HOM Sotheby's Intl Realty, 949-510-2395 - Laguna Beach, CA
Laguna Beach & Lake Arrowhead, CA (949)510-2395

Preaching to the choir....the "buyers market" is in the low prices and low interest rates. I have a lovely young client who won't listen to me and thinks anyone who pays asking or over asking are idiots since it's a buyer's market. Not like that...but if he loses enough, maybe he'll learn?  He keeps sending me news reports and links....I'm sad, but I think he's going to miss out on some great homes and find prices so much higher next year.

November 21, 2009 10:36 AM #53
Rainmaker
70,238
Nancy McNamee
Keller Williams Realty - Roseville, CA

I had a client who asked me why in the world anyone would offer more than the asking price.  In his opinion they were really stupid suckers.  After looking at a house he told me he'd like me to write an offer for him at a specified price, below asking price.  I was in my car ready to leave when another buyer and agent drove up.  Out he popped from his truck, ran over to the car and told me to raise the offering price.  Funny how reality sinks in when they realize they're not the only player in the game and we might know what we're talking about.

November 21, 2009 11:10 AM #54
Rainmaker
137,394
Peter Burr
The Buyers Agency, "Empowering Atlanta Home Buyers" - Atlanta, GA
Managing Broker. Atlanta, GA

We teach our buyers that "list price" has nothing to do with value.  Some properties are listed too high, others are listed too low.  We construct our offers based on what we think the home is worth, not the list price.  Some of the best deals our buyers have obtained were purchased only because we offered above list price.

November 21, 2009 12:14 PM #55
Rainmaker
333,351
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Phil

Real estate, fact, fiction or a mix in between. Inherit value is hard to put a price on as well as family safety and neighbourhood

Ty

November 21, 2009 12:27 PM #56
Rainmaker
190,703
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

There are so many buyers that are not taking advantage of this great buying opportunity they have because they want a better deal.  Get off it already.  Tax credits, incredibly low interest rates, lots of inventory, and they still want a deal or want to wait.

November 21, 2009 01:50 PM #57
Rainmaker
1,256,067
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

It is only a buyers market it you compare it to the prices of a few years ago.  Buyers are actually having trouble finding houses.

November 21, 2009 06:36 PM #58
Rainmaker
285,008
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate

You are preaching to choir my friend! I only wish I could get this same message clearly to all the buyers here..sigh~

November 21, 2009 09:51 PM #59
Rainmaker
128,113
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

It depends.  If you want over million dollar homes in metro Denver take your pick.  If your looking sub 85K the amount of inventory is less than a month.  Best blog line ever, you aren't gonna raid the neighborhood like an invading Visigoth.  This is good.

November 21, 2009 09:54 PM #60
Rainer
198,406
John Wall
Realty Connect USA - Hicksville, NY

I agree with Gene, people are confusing a buyer's market with the fact that prices are still well off the peak prices of 2005/6.  In our market, the inventory is roughly half of what it was at the high point.  Well priced homes are gone within two weeks.  Buyers who wait for the "steal" are getting left behind.  I have several buyers right now waiting for another good house to come on.  The ones who still aren't willing to be aggressive on these homes are probably wasting all of our time.  The market really has changed back to a normal market.  Sellers who price their home properly are seeing it move quickly.  The rest are sitting.

November 21, 2009 10:03 PM #61
Rainer
122,675
Marian Pierre-Louis
Fieldstone Historic Research - Medway, MA
Metrowest Boston

There's a buyers market and then there's a fire sale.  Buyers often have a fire sale mentality.  They aren't aware that the prices they are seeing are great prices.  Ironically, the only ones who are seeing that are the sellers who are selling at a loss.  But there is nothing like a buyer losing a house in a multiple bid situation in a so-called "Buyer's Market" to cure them of their misperceptions.

November 22, 2009 07:13 AM #62
Rainmaker
578,764
DeeDee Riley
Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA
Realtor - El Dorado Hills & the Surrounding Areas

Thanks Phil,

I have to repeatedly talk to my buyers about the particular market and price range they are looking at as it is not cut and dry.  Each house almost has to be evaluated for it's potential buyer competition.  But in general none of the sellers, including banks are accepting offers 25% lower than the listing price.  Before I let my sellers accept a really low offer, I would encourage them to lower their listing price significantly and see if that generated multiple offers.  If one person were willing to pay that low a price, there could possibly be many others and that would help drive the price up. We see it with foreclosures all the time.  Buyers need to understand these kinds of things. 

November 22, 2009 12:11 PM #63
Rainmaker
811,858
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

Good example of a buyer market. As I always tell my buyers, yes the market is flexible at this time but the sellers have not gone insane!  After a couple of hard knocks, loosing out with dual offers, they get a different perspective.

November 23, 2009 01:03 PM #64
Rainer
41,053
Dominick Gaccino
Dominick gaccino - Peekskill, NY

It is a buyers market but most 1st time home buyers think they are buying a used car from Kurt Rusell in "used cars"

 

meaning they can make REDICULOUS offers(like you said 400k on a 500k asking price)

 

All I can say to these buyers is rates are VERY low(and stick with a fixed so you dont screw yourself---high 4's on 30 year), and so are the prices of homes so take advantage...........sounds like in next 6-12 months rates will go up .5% and stay there

 

anything i can do to help please keep me in mind....i'm right in Peekskill/ctld manor area

 

DOMINICK GACCINO
ABC123 Mortgage Corp

914-391-2388

www.abc123mortgage.com/dg

November 24, 2009 06:55 AM #65
Rainer
31,555
Linda Landry
HomeSmart Realty - Tucson, AZ

Unfortunately Mr. and Mrs. Buyer have the notion they are the ONLY buyers out there.  I just lost a couple who took their sweet time in responding to listings I sent for their review via email.  Six of the seven they chose to see had contracts on them.  I don't think they believed me.  They no showed for the appointment I set with them to meet in my office for the purpose of selecting other properties to view in person.  Perhaps they found another agent; perhaps they will see that the 'deals' (decent shape and price) are gone in the blink of an eye.  Perhaps they will then realize I was telling the truth.  Perhaps none of the above.  Oh well, NEXT!

November 25, 2009 09:56 PM #66
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Rainmaker
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J. Philip Faranda

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