Everybody has an angle

Today’s has a picture of my house on it and an offer to pay

  • No commissions
  • We pay the closing costs
  • No repairs
  • Moving assistance if needed
  • Fast, Fair Cash Offer

Interestingly enough, today’s missive came from a real estate office, although it was not identified as such.

Nonetheless, I see two things going on here.

First, there are people out there ready to separate you from your home. There is no way an investor is going to readily give you a fair cash offer. None. They may start with one, many investors do, but by the time their contractor is done writing up their bid, you’ll have expensive bids for repairs you never knew you needed being deducted from the purchase price. Why? Because they need to make money and they’re going to make it by squeezing you. Think you’re a great negotiator? Unless you are negotiating every day in your business, the answer is probably not. The experience is just not there for you and you’re going to get your pocket picked. End of story.

I am a decent negotiator. Even I think I leave something on the table from time to time. My current favorite negotiation story involves a home that needed some repairs that were not disclosed. My client wanted $9000 in credits. That was it. Ultimately, I never actually asked for the $9000, because the seller’s agent, a few minutes into our conversation offered me a $30,000 price reduction. I positioned the $9000 so well that she gave me $30,000 without me asking for anything. Most people are not good negotiators, was there another $5000 in there to be had? Possibly but my buyers were happy.

Knowing that you would think that I would negotiate the purchase of my new car, right? Nope. I’m not used to playing in that sandbox and while I think I could have done quite well, I used a concierge who got me everything I wanted and saved me $50 a month.

The second thing going on is that these guys are giving us insight on where they think the market is going. They are doing mass mailings into neighborhoods looking for houses to buy. If they thought we were in a bubble they’d be holding cash, but they’re looking to spend their cash. These investors are bullish on the real estate market right now.

Right now there are entire neighborhoods out there where every single house is in an equity position. Every one. That is not what a bursting housing bubble looks like. Remember, a bubble is caused by a fundamental flaw in the market, something akin to an aneurysm. With every home in an equity position, that’s a healthy neighborhood. That’s not to say that something happening in another market sector can’t create the flaw in the market, just that currently none exists.

Finally what does that mean to the Bay Area housing market? For the time being, it means our market will remain vibrant. If you’ve been on a freeway in the last six months, our full employment is evident by the traffic. There is plenty of talk of a housing crisis and there is a problem with affordable housing. Some cities are making it easier for builders to add more affordable housing, or even more housing. It’s a supply and demand problem solved by more supply. Some cities are loading the builders up with fees and nonsense. They are understandably choosing the build elsewhere and that does not help the situation. I believe if we allow them to build more units regardless of the price of those units, the supply will catch up with the demand and that will be what finally puts some downward pressure on prices of homes and rents. If they want to build $1.5 million homes, fine. Eventually there will be too many of them and the homes that should be selling for $750,000 but aren’t due to demand will go back to $750,000 where they belong.

Wild card: Interest rates. Today’s buyers are spoiled rotten by 11 years of artificially low interest rates. Traditionally a great interest rate was about 6%. These buyers have shown their disdain for interest rate upticks and in response to their disdain, rates softened a bit at the end of the year. The stock market has ceased its rapid ascent but as of this writing seems to be capitulating within an expected margin showing signs of stabilization.

Wild card: Tariffs. The market reacted predictively poorly to the tariffs. They are currently on hold. It is my hope that they are never revisited. I thought they were going to be a problem and they were. The minute they were stalled the markets are responded positively and in my mind predictively.

Wild card: Government shutdown. Day 32 and it trudges on. If this starts turning into something like the Air Traffic Controller strike, we’re going to have a problem. Some key players who are working but aren’t getting paid: Coast Guard, TSA, FBI, and Border Patrol. A lot of these folks own homes and may not have the savings to hold on. If this gets past a second month, all bets are off. I have clients who are USCG, TSA and FBI. I can’t imagine the stress they are going through right now. For everyone’s sake and the sake of our economy, I hope this ends soon.

What to expect from the housing market

I find that if I look, I can always see a theme to what’s going on around me.

“You can get anything you want from Alice’s Restaurant, ‘cepting Alice”

Last month’s theme was unrealistic expectations.  That’s a tough one too.  Unfortunately due in part to what’s in the media for our consumption, it can bite us all from time to time.  Yet, you can get anything you want…

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Here is Alessandra Ambrosio.  A beautiful woman in her own right, but the picture on the right is what you see in magazines and on the internet.  Her makeup artist is paid handsomely to make her look even more fabulous.  And then she gets photoshopped and is barely recognizable as the same woman.

How about the music we hear?   It is a well known fact that the engineers just fix the mistakes with autotune and the artist never hits the notes.  Listen to the difference between Kanye West and Elaine West singing the same song.

One version is shot live, the other has autotune.  One will be a huge hit, the other will be an alternative favorite…and a favorite of mine.

I can work out like a dog and eat exactly what I’m supposed to and all the airbrushing in the world isn’t going to make me a super model.  Heck, I may never see a six pack again!  All the auto tune in the world isn’t going to make me a great singer, but it did make Brittany Spears a lot of money.

Houses are the same.  HGTV is a lot of fun but they aren’t your friend.  They are all airbrushed and scripted and auto tuned.

Their buyers aren’t functioning the the Bay Area market and they aren’t paying Bay Area labor prices for the work that is being done.  There are experts helping out every step of the way on the Do It Yourself segments and the experts you see remodeling are using the show as a loss leader item.

The truth is in the home buyer process it’s a lot of give and take and trade offs.  A buyer can get it all but it’s going to be at a price.  Good schools, a freshly remodeled eco-home with an open floor plan, a clear termite in a great neighborhood is not going to be the best deal in town.  It will be a nice home to live in, but all of that comes with a price tag.  I hate agents that talk about selling buyers their dream home.  It sets unrealistic expectations for the buyer.  Not one of us is going to get everything they want in an existing home.  It just doesn’t happen.  Can a great home be found?  Yes.  Can it become a dream home?  Yes.  It probably isn’t as it stands on the market and that’s the rub.

Recently I had a buyer complaining about the schools in Danville.  I thought “homeschool?”  Danville has great schools but on the internet he was able to find complaints about the Danville schools.  There is always going to be something, it’s a matter of tolerance.  Can I live with this?  Can I work with this?  Can I thrive here?

When it’s all said and done, stuff is going to happen even in the best neighborhoods.  Martha Moxley was murdered by a Kennedy in upscale Greenwich Connecticut.  Stuff is going to happen.  What are the odds?  But it happened.  There just was a shooting in an upscale Livermore neighborhood.  Stuff is going to happen.  We mitigate as best we can and hope for the best.

I’ve sold six homes in my own neighborhood.  One had a bunch of water underneath it.  The buyer was a contractor and crawled the home.  He found a broken p-trap under the shower.  He bought the home way under market, got some fans and some lime and dried up the crawl space.   Spent about eleven dollars on a new p-trap and as of today has doubled his investment.  Another buyer had to replace all of the carpet, he’s up about $150,000.  Time can solve all.

At the end of the day, it’s a matter of tolerance.  Personally, if I have a good roof over the home and it’s the worst house in a great neighborhood, I’m in.  I have a client who tells me all the time “Val, I’m just not handy, we are not handy people”.  He pays a little more for his homes but his piece of mind comes from knowing he doesn’t have to do things outside of his comfort zone.  But he understands that it costs more to go that route.  He knows he is either paying up front or paying as he goes.  He choses up front.  That’s his tolerance.  To expect to get the best deal on a fresh house that doesn’t need any work is unrealistic and he understands that.  He’ll get a good price, just not a great one.  Someone else put in the sweat equity and that has value.

My advice, understand your tolerances.  Understand what you can and can’t live with.  Know your must haves and your can’t live withs, verbalize them to your agent and get the right home for you.

For a comprehensive buyer’s consultation call me at 925-381-2998.  Let’s talk about the possibilities.

 

About your Zestimate

Yesterday I received an email from Zillow entitled “Scripts: Talking About the Zestimate With Clients”.  It linked to a five page document full of scripts, that is canned responses, for dealing with client questions regarding Zestimates.

Zestimate is what Zillow estimates a home to be worth.  Folks, it’s an algorithm.  A computer takes a guess as to what a certain home might be worth based on recent neighborhood sales, square footage and market trends.  Zillow has not come into your home.  It does not fly a drone into your house and look around.  Zillow does not know if your counters are formica from 1957 or granite from 2014.  It does not know if your flooring is state of the art hand scraped bamboo or orange shag from 1967.   It does not know if your refrigerator interfaces with your iPhone or looks like something from June Cleaver’s home.

philco

The Zestimate is a guesstimate.  That is all.  The current Zestimate on my house doesn’t know that since it’s last sale all of the flooring has been replaced, the home has a new roof, the master bath is remodeled, air conditioning has been added and all appliances have been upgraded.

I have a listing that the Zestimate is probably off by $100,000.  Is Zillow hurting my seller?  Absolutely.  All the scripts in the world aren’t going to solve that problem.

Truth?   True value is determined by what a buyer will pay a seller.  Period.  The Zestimate is an algorithm, a computer generated guess that does not take into consideration condition or upgrades to the home.  A Realtor can give you a Comparative Market Analysis that will be closer to the valuation.  Unless that agent is going to reach into their pocket and write a check for that home, that is not the value either.  The value is what a buyer will pay for it in the open market.  There is only one way to figure that out.

Can the value vary?  Absolutely.  One of the biggest variances is predicated by bad marketing.  We call it Post and Pray.  The agent posts a sign and prays it sells.  Great agents have a marketing plan, a methodology for selling and adjust that plan according to market conditions.

Don’t fall victim to the post and pray strategy.  I have a fourteen point marketing plan that I apply to every home I sell.  To learn more about how my marketing strategies net my sellers an average of 9% over asking, give me a call at 925-381-2998 and see how much more you can get for your home.