How the "Buyer's Market" Mentality is Hurting Buyers

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

Buyer's market mentality can hurt the buyerI have written before on what a buyer's market is and what a buyer's market isn't. Westchester County and our surroundings are a sought after destination; even if a home has been on the market for a year, once the price is right it will sell. I wish I could impress this upon a few buyers who have lost opportuntities when more motivated people came along and outbid them.  

We recently listed a newer build in a desirable subdivision. While it was a short sale, it was also upscale. Not long afterward, an offer came in almost 15% below asking price, a hefty discount not supported by any other market activity. The rationale? It's a buyer's market!

The seller countered, and the would-be buyer raised their number gradually, but well short of what we thought we could submit to the bank for acceptance (by "we" I mean my seller and their attorney). This went on for weeks. They never came up to the bottom line number we felt we could work with, and this resulted in some frustrated emails and phone calls from the agent. Then even the buyer called me directly. I don't know if the buyer thought they could be more convincing than the professional they had representing them, but I told the person both times that there was no comparable sale that justified accepting the offer. 

"But it's a buyer's market!" I was told. The house has been for sale for TWO WHOLE MONTHS and hasn't sold. I was risking having the bank take the house back if my client didn't take their offer. Furthermore, I was told, they were perfectly happy to wait until the bank repossessed and buy it at foreclosure to get their price. 

How lovely. This actually happened with two different byers on the same house- the same pattern and rationale. 

In each case, I asked the agent to ask the buyer to stop contacting me and go through their rep. 

Not long afterward, another buyer came along and made a stronger bid, which was accepted. They got the house.

Fatal mistake number one: Buyers should NEVER assume that they are the only game in town.  
Fatal mistake number two: A "buyers market" does not give the buyer fiat to set the market unilaterally. Comparable sales matter. 
Fatal mistake number three: When a buyer circumvents their agent and tries to negotiate on their own, they aren't accounting for the fact that they probably suck at negotiation and are hurting their own cause.  

In all three cases, the "buyer's market" phrase was thrown around as if it were some childhood game wildcard phrase that granted immunity from logic or true market forces. And in that buyer's market, the would-be buyers lost a home because they were their own worst enemy. The people believed that if they gave in just a little that they'd "lose." 

Pigs get fat, hogs get slaughtered. 

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  1. Mike Cooper 01/27/2012 11:39 PM
Topic:
Home Buying
Groups:
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Rainmaker
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Cynthia Larsen
Safe Haven Realty | 707-332-2560 | Serving all of Sonoma County, CA - Cotati, CA
Independent Broker/Owner

Amen Philip. I loved your phase "as if it were some childhood game wildcard phrase that granted immunity from logic or true market forces".

Jan 27, 2012 08:50 PM #6
Rainer
109,537
Carlotta Remong
Prudential Prime Properties - Newport, RI

Great post Philip, it is very important to realize that  real estate is local and maybe their friend could steal a deal in Florida and buy a condo at a 40% discount...it is not the case in many markets.

Jan 27, 2012 09:09 PM #7
Rainmaker
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Susan Mangigian
RE/MAX Preferred, West Chester, PA, RS152252A - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

Well done Phil!  

Jan 27, 2012 09:32 PM #8
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John McCormack
Albuquerque Homes Realty * www.AlbuquerqueHomes.com - Albuquerque, NM
AlbuquerqueHomes.com, Albuquerque Homes Realty

Phil I am with you!  Hear it, see it, live it myself all the time.  Like your pig association.  Suggested.

Jan 27, 2012 09:41 PM #9
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Mimi Foster
EPIC Real Estate Group - Colorado Springs, CO
Voted Colorado Springs Best Realtor

Truer words have not been used to describe what is going on in the market place.  Got a call today from a Client who is still grieving because he wouldn't come up on his offer on a house he loved.  He didn't believe me when I told him it wouldn't last.  He offered low, the Seller countered to a reasonable amount, someone else came along and snatched it.  It's been six months, he hasn't found anything else to entice him to make an offer.  Also suggested.

Jan 27, 2012 09:51 PM #10
Rainmaker
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Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Suggested.  I've wrritten to market reports for December and year end comparison 2010 to 2011 "absorption rates" for my local market.  The numbers are showing a neutral market -- far from a "buyers market". 

Jan 27, 2012 09:53 PM #11
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Judi K Barrett
Judi Barrett~Integrity Real Estate Services~Idabel, Oklahoma - Idabel, OK
Broker/Owner, Integrity Real Estate Services -IDAB

I've a similar instance or two.. buyers think it's their game totally and end up losing the game. 

Jan 27, 2012 10:07 PM #12
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Jeff Dowler CRS
Solutions Real Estate - Carlsbad, CA
Carlsbad CA Homes for Sale (760) 840-1360

J. Philip

An excellent read and one that many buyers ought to take to heart. There is no such thing as a national buyers' market, although the media hasn't a clue. And market, and price points, are often in flux. Sadly, the words "buyers' market" seem to immediately result in very low offers that have no basis in market reality, amd a sense that all sellers are desperate.

And now, in 2012, we are seeing more positive shifts in many markets as evidenced by marlet reports here - I have multiple communities now with inventories below 5, and in a few cases, 4 months. Buyers' market? Not necessarily.

And even if the market favors buyers, there isn't just one buyer for a house. You can't assume youare the only one looking at that great opportunity.

Jeff

Jan 27, 2012 11:52 PM #13
Rainmaker
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Christine McDaniel
Red Key Realty Leaders - Crown Point, IN
Broker Associate

Philip, I enjoyed this post.  I've been on both ends of this situation as I'm sure many of us have.  Trying to keep the sellers calm and getting them to counter a low offer is not easy.  It's also hard being the buyer's agent having to present a really low offer that you know won't get accepted.

Jan 27, 2012 11:53 PM #14
Rainmaker
654,115
Realty Works Temecula
Realty Works Temecula - Temecula, CA
Real Estate, Temecula, Murrieta, Menifee

Hi Philip:  Great well written post!  Have a nice weekend.

Jan 28, 2012 12:00 AM #15
Rainer
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Doug Bullwinkel
Vitek Mortgage Group - Roseville, CA
NMLS #281609

There's no shortage of things that are hurting the market today.   Buyers and sellers both need to be realistic to make things work.  Suggested as this is an important topic and well done.

Jan 28, 2012 12:23 AM #16
Rainmaker
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Elite Home Sales Team
Keller Williams Realty - San Clemente, CA
A Tenacious and Skilled Real Estate Team

I do so agree not every home is a distressed property selling at a discount.

Jan 28, 2012 12:55 AM #17
Rainmaker
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Debbie Gartner
Floor Coverings International Westchester NY & Stamford CT - White Plains, NY
The Flooring Girl - Westchester hardwood flooring

Hey Phil.  Yes, this bothers me, too. Many don't get that since it's a buyer's market, that is ALREADY factored into the selling price (and interest rate).  That's why it's such a great time to buy.  (Plus I guess lots of inventory...again, that's reflected in the selling price already...assuming the agent got it right and it works w/ comparables).

Jan 28, 2012 06:30 AM #18
Rainmaker
635,862
James Quarello
JRV Home Inspection Services, LLC - Wallingford, CT
Connecticut Home Inspector

I actually see this mentality in my profession. There are buyers who feel my list of deficiencies can be used to pound the seller down further into submission. It can at times get under my skin.

Jan 28, 2012 10:31 AM #19
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Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

My first laugh out loud moment on AR in a while came when I read, "... they aren't accounting for the fact that they probably suck at negotiation and are hurting their own cause."

Jan 28, 2012 12:19 PM #20
Rainmaker
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Peggy Wester
Think Young Team--Realty Executives Integrity - Grafton, WI
Real Estate Agent Ozaukee & Washington County Real

Excellent post -- excellent. I recently had a buyer suggest getting pre-approved wasn't necessary/important because it's a buyer's market and the seller should just be happy to have that buyer/offer. Huh?????

Jan 28, 2012 06:30 PM #21
Rainmaker
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Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning J Philip. You never fail to express yourself so well that I wonder why you don't write for a living. Beautifully crafted and oh so well written. Buyers market, sellers market......want the house: buy it.

Jan 29, 2012 10:25 AM #22
Rainmaker
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Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

If I had a dollar everytime I hear that phrase. We ask explicitly what the buyer is looking for, price and location, and then we go into the macro-neighorhood market, sometimes down to the specific city block or specific 'lines' of unit in the building to let them know that, it is not across the board BUYERS MARKET.

Jan 29, 2012 10:56 PM #23
Rainmaker
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J. Philip Faranda
J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY - Briarcliff Manor, NY
Broker-Owner

Sheila-I do write for a living! This blog is one of the true assets of the company. 

Jan 29, 2012 11:12 PM #24
Rainmaker
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Jill Sackler
Charles Rutenberg Realty Inc. "Said and Done!" - Merrick, NY
Long Island's South Shore Real Estate Agent

How was this not featured? It's fantastic and it expresses exactly what agents are experiencing every single day.

Feb 02, 2012 04:16 PM #25
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