make offer

How Motivated is the Seller Really?

“When the student is ready, the teacher will appear.”

–Zen saying

“When a listed home is priced right — and well-prepped, photographed, marketed, etc. — the Buyer will appear.”

–Ross Kaplan

One of the most common lines listing agents (representing Sellers) hear from their clients — particularly when their home isn’t attracting strong interest from Buyers — goes something like this:

“I don’t want to drop my asking price, because that will hurt my negotiating leverage.  Instead, just tell anyone who’s interested in my home to make an offer, and we’ll negotiate.”

Unh-uh.

In my experience, such a tack seldom works, for three reasons:

One.  “Minnesota Nice.”  If a home that’s listed for $200k is worth closer to $150k, Buyers — at least in Minnesota — are hesitant to offer something, say, in the $140’s.

Their fear?

They’ll offend the Seller.

Even when an offer isn’t a lowball, if the Seller regards it as such, it’s likely to antagonize them and make a future deal more problematic.

At least with that Buyer.

(Often times, a disappointingly low offer sets up a deal with another Buyer.  See, “What Lowball Offers Really Accomplish.“)

Buyer Trap

Reason #2 has to do with what I’ll call “faux Seller motivation.”

Just because a listing is larded with come-on’s like “all serious offers considered,” “must sell,” etc., doesn’t mean that the Seller is truly motivated.

My favorite New Yorker cartoon shows a father and son in front of a store front window plastered with signs blaring, “Must Liquidate!” “90% Off!” “Going Out of Business!, ” etc., etc.

The caption?

“Some day, son, this will all be yours.”

Buyers who take the bait and engage with an unmotivated Seller soon discover it’s a frustrating waste of time and energy.

Or worse (see next).

Strategic Considerations; “Shopping an Offer”

The third reason Buyers don’t write offers on overpriced homes is more tactical.

When an otherwise perfectly saleable home sits on the market at a too-high price, interested Buyers will frequently wait and watch for a price reduction.

So will their agents.

A good listing agent keeps track of such interest, and — if a written offer comes in, however low — will try to use it to flush out other offers.

Buyers who don’t want their offer shopped or otherwise used against them . . . don’t make written offers.

That’s true even though the Buyer has the right to withdraw their unaccepted offer at any time (note to Sellers: they do).

List Price as Market Signal

So, when it comes to would-be Sellers setting an asking price (or reducing it, if that becomes necessary), what’s the takeaway?

When a home’s list price is in the ballpark — and the home is otherwise well-prepped, staged, marketed, etc. — one can reasonably infer that the Seller is motivated.

When their asking price is unrealistically high . . they’re not. 

P.S.: Of course, the other issue with setting a too-high list price, at least in a housing market with decent inventory:  Buyers will compare the overpriced home to more impressive homes in the same price range, and find it wanting.

Then, one of two things will happen (or should I say, won’t happen):  1) the home won’t get shown; or 2) if it is shown, there won’t be any follow-up interest.

See also, “Listing Agent Come-on:  ‘Seller Will Look at All Offers.

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2_Fern_Hill_Summer_small

Three Caveats — & One Big Outlier

Prices in St. Louis Park’s “first alphabet” Fern Hill neighborhood have been appreciating smartly over the years.

medianWhich only makes sense:  the high-demand neighborhood is just west of Cedar Lake; close to downtown Minneapolis and Uptown (but not too close); and has been enjoying a wave of major remodels and new construction the last decade or so.

But, given that much of the housing stock there is still older (1950’s and earlier) and smaller (under 2,000 finished square feet) — how can average sale prices possibly be that high?

Parsing the Numbers

Here’s how:

Unlike the “median” sales price, which identifies the mid-point of a list, “average” totals everything on the list, then divides by the number of items.

Here are the list prices of the seven Fern Hill homes that have sold (so far) this month:

$199,900
$265,000
$390,000
$575,000
$735,000
$749,000
$4,500,000

“Average” vs. “Median”

Per the above, the $1 million-plus ($1.059 million, actually) average sales price is explained by an outlier:  a two-building property overlooking Cedar Lake that was last listed for $4.5 million.

See, “New on the Market:  2545 Huntington Ave. South in Fern Hill for $4.995(!) million.

By contrast, the median sales price for Fern Hill for January is a much more plausible $575k (bold italicized on list above).

The three other caveats about the $1 million average price:  1) the numbers are for just one month; 2) the homes haven’t closed yet — that’s supposed to happen in February; and 3) the above statistics are based on list price.

So, the actual, closed sales prices for January are likely to be about 5% lower.

On average . .  .   ;-) 

P.S.: Excluding months with a $4.5 million sale, Fern Hill’s average home price is around low $400’s these days.

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What Comes After Record Airline Profits?

by Ross Kaplan on January 23, 2015

Sell High, Buy Low — & Look Out For Competitors

airfare

Why aren’t airfares falling with oil prices?

Being an ardent free marketer at heart, I don’t think government should do anything — at least directly — about airfares that remain at nosebleed levels even as airlines’ fuel costs collapse and their profits soar.

Instead, I think government should focus on steps to increase competition.

You know, allow things like markets, supply and demand, etc. to drive fares down.

In that vein . . how about doing something to expedite new airline startup’s getting, umm, off the ground?

Challenge #2:  making sure gates at U.S. airports aren’t monopolized by a few mega-carriers.

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Lester

The Most Chilling Crime Scene Since “The Usual Suspects”

Lorne Malvo:  “Is this what you want, Lester?  Is . . this . . what . . you . . want?  Yes, or no?”

Lester Nygaard:  “Yes.”

Such is the chilling exchange/showdown between “heavy” Lorne Malvo and once-upon-a-time good guy(?) and former milquetoast Lester Nygaard in the (casserole) crime noir TV series “Fargo.”

The setting:  inside a Las Vegas hotel elevator, in a scene that’s an instant classic — and eerily reminiscent of an equally memorable scene in crime thriller “The Usual Suspects,” more than 20 years ago.

That movie, of course, introduced the world to “Keyser Soze,” the last character as malevolent as Lorne Malvo, played by Billy Bob Thornton.

“Casserole Crime Noir”

Far be it from me to ruin this (or dozens of other memorable) moments in the terrific FX series.*

Suffice to say, for erstwhile fans of “Breaking Bad” who despaired of ever getting another fix:

Rejoice!

Your wait is over . . .

P.S.:  Or already was.  The 10 episode series originally ran last April – June, but I just caught up to it online.

Notwithstanding the linkage to “The Usual Suspects” and the Coen brothers’ involvement as producers, “Fargo’s” true provenance is “Breaking Bad.”

Usual_suspects_ver1

*My second favorite “Fargo” scene: policewoman Molly Solverson (played by a superb Allison Tolman) registering a beautifully nuanced rainbow of emotions as she listens to Sheriff Bill Oswalt (played by Bob Odenkirk) tell a tearjerker story.

Third choice:  the “courtship” phone conversation between Solverson and beau Gus Grimly, played by Colin Hanks.

The scene ranks up there (really!) with the classic Jimmy Stewart – Donna Reed phone call near the beginning of “It’s a Wonderful Life.”

See also, “The Most Famous Home in America (at least tonight).

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Appealing to Buyers’ Emotions (vs. Pocketbooks)

January 22, 2015

Playing Down the Price “Patriotism is the last refuge of a scoundrel.” –Samuel Johnson The real estate equivalent of Johnson’s line is, “when you’ve got nothing else (left?) to sell, sell price.” That’s not to say value is irrelevant. With ever-more discriminating consumers, online information, and high tech tools and savvy generally, value has never been more important. […]

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Missing Millennials: Where Are All the First-Time Home Buyers?

January 22, 2015

Millennial Subcategory:  “Baby Boomerangers” One of the factors holding back the housing market is the (relative) dearth of first-time Buyers. Typically, such Buyers account for 40% of all residential real estate sales; the last few years, however, the percentage is closer to 33% (one-third). What accounts for the slippage? Three Theories Given that the average […]

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Overreaction to a 1¢ Earnings Miss? Maybe Not

January 21, 2015

IBM Lowers Forecast, Stock Tanks “IBM forecast earnings for 2015 of $15.75 to $16.50 per share, below the $16.51 per share average estimate on Wall Street.  The company’s stock fell 2% in after-hours trading.” –“At IBM, a Weak Streak Persists”; The WSJ (1/21/15) At first blush, it seems like a classic overreaction:  a storied company […]

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What’s So Bad About a Flat Housing Market?

January 19, 2015

The Virtue(s) of a Slower, Quieter Housing Market Apparently, at least a few industry players are trying to spin what is expected to be modest price appreciation in 2015 into something . . . bigger. See, “Projecting 2015 Housing Prices Using Statistical Sleight of Hand.” I don’t think it’s ever a good idea to embellish […]

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