Green Ink and Multiple Offers: It’s the end of the buyer’s market in San Carlos…

We have hit the bottom…

There…I said it.

Call me crazy, or foolishly optimistic, or blind (or all three.)   I have resisted joining the drum beating of others who have been saying all summer “NOW’S the best time to buy!”  But my answer to the often asked question “When will the real estate market hit the bottom?” has always been when:

1. We start to see multiple offers on a consistent basis, AND
2. The green ink makes its return to the Weekly Review…(translated:  Homes start to fetch more than asking price.)

Well sports fans, based on that definition, we have found the bottom of the market in San Carlos.   And this means that as quick as a flash, the control that had been in the hands of the buyers has been cruelly ripped away by the sellers.   The brief “buyer’s market” we had in San Carlos is over…for now.

It’s NOT 2005 again.

This doesn’t mean that every house is going to start flying off the market.  Homes that are in lousy condition and are over-priced aren’t going to sell.  They didn’t back in the super-heated market of 2005, and they won’t now either.  But in the past couple of weeks, we’ve seen an absolute stampede to buy attractively priced homes that are in good condition.  Multiple offers are almost becoming commonplace again — two listings were just on the market up by Highlands Park both got multiple offers (both listed in excess of $1M) and Dave Blewett’s listing at 145 Beverly Drive proudly proclaims that it sold with multiple offers.   And believe me, there will be more.

The bottom is a process, not an event…

Finding the bottom of a market is like watching a jumbo jet land — it will bounce off the runway a couple of times and then roll for a mile or so before it ultimately starts its journey upward again.  Right now, we’re feeling one of those bounces in the real estate market.  Does this mean all is good and prices will start to climb again?   If I had the answer to that question, I wouldn’t be here right now.

Much as I’d like to forget about it, we still have double-digit unemployment to contend with.  And there’s strong evidence that there’s another wave of foreclosures coming to the area.   Hard to say how this surge of inventory will impact the market.  But for now, if you’re shopping for a home in San Carlos, you need to change your mindset.  Now.

“Same as it ever was..”

That line in the great Talking Heads tune is fitting for where we’re at right now in San Carlos.   Remember how it was just a year or so ago when you got that new-listing alert in your email inbox, or when your “plugged-in” agent called you about a hot new home that hit the market — and you had to go see it that very night?  Well, we’re almost at that point again.   Some of the hotter listings are only on the market for a few days.  That means if you wait until the open house, you’re either too late, or best case you’re days behind your competition.  That could be the difference between winning the home, or continually missing out.

So keep an eye on the upcoming San Carlos Real Estate Week in Review posts.   If the short days-on-market (DOM) numbers and the green ink stick around, then you can safely assume we’re at the bottom.

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San Carlos First Time Buyer’s Tip: Don’t wait for the price reduction…

The Three Outcomes

As a home buyer, you’ve likely made up a list of homes that you want to see.  These homes made your list because they met some or all of the preliminary criteria you put in place for your ideal home;  price, location, bedroom/bath count, school district, etc…   Since you’ve done your homework, you’ve weeded out the ones that are out of your price range, or have some sort condition that’s a show stopper for you.   So your list is already “qualified.”

You now get in the car to head out and “tour” these qualified homes.   As you exit each one of these houses, your brain will automatically file each one into one of three basic categories:

1. You like the house, and you think it’s priced well.
2. You don’t like the house, regardless of the price.
3. You like the house, but you think it’s priced too high.

The outcome of the first two scenarios if obvious — you’ll likely jump at writing an offer on the first, and you’ll never write an offer on the second.   But interestingly, many buyers miss out on that third category of homes.  Why?  Because they simply move on to the next house, assuming this one will never be a good deal…or, they decide to sit and wait for the price to drop to a point that it will be a good deal.   Neither of these choices is necessarily the best, but more on that in a bit.

The Honeymoon.

When a home hits the market in San Carlos, you’ll generally know within the first 14 days whether it “hit the mark” on pricing.  Why 14 days?  This allows time for a broker’s tour, and at least one open house weekend, and then a day or so to take offers.  I call this the “Honeymoon Period.”   Generally speaking, if a home isn’t snapped up within this period, the market has effectively spoken with its feet that something isn’t quite right with the pricing.

That’s a pretty bold statement, but I contend that the stats on this blog back it up.  Even in slow times, the demand is high enough in San Carlos that new listings have been disappearing inside of the 14-day window when they’re priced right.

The 30-day price reduction.

When a home hasn’t fetched a buyer during the honeymoon period and there’s no clear indication that one’s on the horizon, sellers start to plan for the inevitable price reduction…after all, the market has spoken, right?   And when do they normally reduce the price?  Right at the 30-day mark.  Why?  I have no idea, other than it’s a big round number.   But the “why’ isn’t important.  The fact that the market has become conditioned to expect a reduction at about the 30-day mark IS important.

And this is where the buyer’s mistake comes in.

Wait, and expect company.

Our hypothetical buyers above has now found a home that they like, but they think it’s priced too high.   So they decide to wait.  Sure enough, they were  right…the honeymoon comes and goes without an offer,  and now it’s knocking on 30-days.   Almost magically, the seller has softened up and drops the price at the 30-day mark to something that makes more sense.    Suddenly, our Category 3 home becomes a Category 1 home.  Eureka!   They’ve got the seller over the proverbial barrel.   They jump in to start the negotiation..  But what’s this?

We’ve got company…

This sure-fire negotiation strategy has now backfired, because it has become a multiple-offer situation.  Why?  Because another buyer did exactly the same thing.   They waited for the price to drop to where it should have been in the first place before starting the negotiation.   Now, any leverage they thought they had by letting the home languish on the market is gone in a flash…simply because there’s another offer to compete with.

Do your homework, drive your deal…

What should have our unlucky buyers done to avoid this?  Clearly, if a home is over-priced, there will be a mountain of data from comparable home sales to prove this fact.   A good Realtor who knows his target-market well will know that a home is over-priced almost intuitively, and can back up this “gut-feel” with solid data.

Rather than wait for the seller to make the first move, the buyer should write an offer (no verbal what if’s) based on what they truly believe the home is worth.   The more facts they can present in a non-threatening manner to back up their position, the better.   Note that this is far different than submitting a low-ball offer.   You’re not insulting the seller, because you have market data to back up your price.    With facts in hand, the worst thing that can happen is that seller says no, or counters your offer.

Or, better yet, you’ll get the house you want for the price you want….while everyone else is just waiting.

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“For First-Time Home Buyers” is a new category on the site that’s a resource for first-time home buyers in San Carlos, and for those who have general real estate questions.

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