patrick.net

DinOR, Doug H

Great stuff on negotiating. I haven't tried the multiple purchase offer tactic, although I certainly will in the future.

I'm saddened to say that my "lowballing" (not actually lowballing, but reasonable-balling, just way below what many sellers think is reasonable at present) has been suspended. I've run into a wall of unexpected resistance here in South Marin.

I'll explain more later in a thread I'm planning on writing. The short of it is that agents here are very incestuous, and have absolutely no hesitation at breaking either CAR/NAR ethics codes or even the law. Basically, I can seldom get an offer through to the actual seller. Anything that goes to an agent gets ignored or tossed in the trash. When I can find out the actual seller's name & address, I send them the offer as registered mail only to have had all but one of those returned to sender unopened.

It seems the problem here is lots of vacant owners who've delegated entirely to the agents. But strangely, even in one case where the owner occupied the place, wasn't a retiree, and I had their full name, they still refused the certified letter with the offer. Obviously they just did what the agent told them to do. (In this case I sent the offer to the agent and seller simultaneously--ok I made sure the seller got it a few days beforehand, so I conclude that the agent pre-instructed the seller to refuse registered mail or something....maybe because I'm not the first such offer?)

And then there's the "reputation" problem. I'm looking in a narrow range of communities, within a narrow range of home types. Probably half the agents now know what I'm doing and they've added me to their blacklist.

Firstly: who was arguing with me that prices wouldn't be sticky downwards? If only I could laugh.

Secondly: I'm not sure what to do at this point other than wait and hope things loosen up, or hire a pro like FAB as a take-no-prisoners commercial-minded broker.

Oh, as long as int. rates don’t go any higher!

Sounds like the Bargaining phase to me. ;)

I’ll explain more later in a thread I’m planning on writing.

Quick, before I start yet another silly thread!

You and the seller BOTH sue the agent for violation of fudiciary duty.

What's the point? No need to upset more people now.

Randy,

Wow. Talk about "going the extra mile" for your cause. You are to be commended, sir!

Have you considered pitching your story as a "local interest" piece to a local news station? Consumer advocate/investigative reporter types just love this stuff (assuming their station's editorial policy allows them to report honestly on RE). Perhaps they could do a feauture piece on seller's agents who refuse to present legally tendered offers, feauturing you as the "victim". :-)

They could do a Mike Wallace-style spot on you running after fleeing realtor with signed offer in hand: "Hold on, Mr. Watts! Why won't you present a valid legal offer to your client? It's the right thing to do and it's the LAW!"

No reason to complete the transaction, just collect the treble damages and nail the agent’s license to your wall. Who’ll need straw bales for insulation?

:lol:

Randy H,

Thanks for the update. To answer your question....... YES it's incest.

I believe we've already established that not presenting the offer is an offense? Well that's one way to create stickiness! I would send another letter to both the realtor and seller reminding them exactly the chapter and verse of the CA Rev. Statutes applies to this and remind especially the realtor that he/she may be opening themselves up to liability if prices soften further!

Dear Mr. Realt-whore,

Your blatant disregard for (insert statute here) has placed you in a position of culpability if/when your client "the seller" decides down the road that my offer WAS reasonable! If my research reveals that a subsequent offer was accepted at a lower price you "may" be liable for the difference!

(Still feeling so confident?)

From the Law Offices of:

RC,

You weren't the only one. This is a classic example of sticky prices. The time between the sellers asking for a "wishing price" and the sellers actually accepting a market price is the period of stickiness. If this were an efficient market there wouldn't be this delay.

Randy H,

This is the very first problem anyone in retail securities faces.

Client: That POS stock you sold me is going down everyday. Sell it now.

Broker: O.K, SOLD at the market! Anything else I can do for you today?

(Any response other than "O.K" just invites liability)

Unless of course you know for a fact that it will only go up!

Why is it that realt-whores consider themselves above the law in almost every regard? Especially without even opening the envelope! That's balls (or stupidity).

RC,

Uhmm, volume is decreasing. But stickiness as I usually deal with it in models is inverse volume weighted delay in price action. So low stickiness is high volume, fast price movements. High stickiness is low volume, slow price movements.

I don't know about your piece of the world, but here it's definitely the latter occurring.

I disagree about utilizing B-S'ish technique to housing prices. You could use the greeks to model the real-options baked into home ownership (mortgage prepayment, refi, sell, don't sell, etc.). But you can't apply such methods to the underlying market value. That is driven by primary macro/micro interactions, which we collectively call fundamentals.

But you can’t apply such methods to the underlying market value. That is driven by primary macro/micro interactions, which we collectively call fundamentals.

You can never force people to believe in anything (e.g. a new price) if they do not want to.

Now if they do not believe in the new price you have stickiness.

I afraid we have to wait for the wave of foreclosures and other forced-sales to get our prices.

The run-up in housing prices was really driven by fundamentals, not speculation

Let's see how the fundamentals hold up in light of stagnant appreciation.

Honestly, if I can be convinced that current prices are completely justified, it would be good enough for me.

But I am not convinced yet.

Perhaps now would be a good time to re-visit the concept of "Mental Accounting" and how it applies to price stickiness currently being observed in the RE market:

From the Housing Bubble Glossary

Mental Accounting: (thanks to Randy H for much input) Concept referring to the powerful role of seller and buyer psychology in promoting rapid price inflation, but working against rapid price DE-flation (hence the term, “sticky on the way down”).

People think in nominal terms, not in real terms.
People think in numbers, not percentages or ratios.
People think in terms of cost, in this case monthly cost, not in terms of value.

Seller example: Sellers tend to set their mental ‘fair market” value of their own house based on the highest comps they’ve heard about in their neighborhood. If comps begin to fall, they are often very reluctant to lower their price, even if doing so would still mean realizing a huge profit over what they paid only a few years ago –and getting out early enough to prevent suffering an even greater loss of value in the future. Most sellers also do not mentally “book” the erosion of the value of their house due to cumulative inflation. Even though selling a house 10 years later for what you originally paid for it would mean a substantial loss of wealth due to inflation, most sellers do not view it this way. This thinking process is clearly non-rational, but quite natural.

Buyer example: A buyer prepared to spend $4,000/mo on mortgage (buyers don’t even think in PITI, though they should) is still prepared to spend $4,000/mo no matter how much homes drop in price (all else being equal). Unless the buyer loses a job or takes a pay cut, they’ll just buy a higher-valued home which drops into their target price range. They won’t go buy the home they wanted in 2004 for 30% less. In fact, they may have even saved up more $ thinking that they’d need more to buy into a rising market. The fact the market is dipping only means they get an extra bedroom, a hot tub, or a nice yard. This also explains why many buyers do not understand or question the terms of their own mortgages –they only care about the monthly payment and do not “sweat” the fine print. Hence, the dramatic rise of NAAVLPs and “Joe Howmuchamonth”.

This explains a lot of the “anomalies” people intuitively feel about the current statistics, particulary the recent phenomemenon of rising median sales prices in the face of plunging sales volume and exploding inventory.

HARM,

Thanks for the "refresher course"!

The Buyer Example could well describe me except rather than PITI, I looked at the max total amount we were willing to pay for our "re-entry point". The longer I waited (the worse it got, remember I bailed early).

We passed that curve in Oregon this summer and now every week when the local rag comes out I've begun to notice that for what I was willing to pay say this time last year I'm now getting an RV parking space, extra bdr/office AND full landscaping! Hey don't laugh (landscaping can run major bucks!). Since then I've become absolutely fascinated w/ how much further our housing dollar goes on an almost weekly basis!

DinOR,

Since then I’ve become absolutely fascinated w/ how much further our housing dollar goes on an almost weekly basis!

The beauty of price deflation action. It is almost magical. Ask a middle-aged Japanese. This is also why our Fed governors wisely defend against wide price deflation with every $ they can print. Imagine everyone, everywhere not wanting to buy anything because it'll be cheaper tomorrow. After a few months of that and no one's buying anything because they're busy getting into soup lines.

newsfreak,

Those sellers may sit,
with with their hand in a catcher’s mitt,
afraid to play ball.

Keep pitching!

Classic! And that must be my problem. I thought we were playing hockey.

Randy,
At least in Santa Clara County, inventory is back up:

http://bubbletracking.blogspot.com/2006/09/tracking-san-josesanta-clara-county.html

Are the actions of these Marin Cty realtors worthy of reporting them to the CAR or to someone in the Justice Department? Send a letter to Elliot Spitzer. Maybe he can actually be useful for once. On the other hand, the CAR will likely turn a blind eye.

Jon Says:

LOL
“The run-up in housing prices was really driven by fundamentals, not speculation,” Snaith said. “Growth in the Bay Area economy and the state overall was not confined to housing-related sectors.”

I did a little digging - Mr. Snaith is a B-school prof at UOP:

http://www.uop.edu/esb/faculty/seansnaith.html

It seems the B-school there provides Central Valley research forecasting (per their web site):

"The Real Estate Institute performs various research and consulting projects of interest to the region's real estate community. This includes a quarterly survey of regional housing prices and the dissemination of the Index of Central Valley House Prices which is developed in cooperation with the Central Valley Realtors Association."

Well, well, well. Mr. Snaith's word should be quite unbiased and reliable, eh?

DinOR,

Howdy Partner.....just call me Marshall Duncan.....LOL

I've left many a broken seller along the trail as I pass through their territory. I'm an equal opportunity buyer; I "break" them all; car salesmen, house sellers, and I don't discriminate one bit.

All sellers, from all markets, from all walks of life are welcome at *my* table.....I negotiate that as well.

I mention the table to make a serious point; just in case anyone is actually reading what I blab. WHERE you negotiate is a very important "bullet in the six shooter". You do not negotiate in the seller's comfort zone if you can do otherwise. The higher the seller's stress level, the quicker he will agree to your points; and eventually, your terms.

The most money I ever made was during lunch rush at the local McDonald's....talk about an "extra value meal"; that was it....and I "super-sized" it as well. BWG

Here's a nice one:

http://dallasrealestateagent.blogspot.com/

She began bloggin' away, then people found her site and began posting comments. The straw that broke the camel's back was her most current one about the Home Warranty. People blistered her for not reading and understanding what she was signing.........

Result:

Comments are gone
No more comments

ROFLMAO

In the Utopia, there is no minimum wage!

I didn't realise Utopia was a 19th century satanic mill AND coal mine with a typhoid epidemic running through the town with barefoot children in rags working in t'pit...

I didn’t realise Utopia was a 19th century satanic mill AND coal mine with a typhoid epidemic running through the town with barefoot children in rags working in t’pit…

In the Utopia there is unlimited resource. Minimum wage would be unnecessarily.

The beauty of price deflation action. It is almost magical. Ask a middle-aged Japanese. This is also why our Fed governors wisely defend against wide price deflation with every $ they can print. Imagine everyone, everywhere not wanting to buy anything because it’ll be cheaper tomorrow. After a few months of that and no one’s buying anything because they’re busy getting into soup lines.

I heartily agree that price deflation is a beautiful and magical thing. However, I take issue with the view that the Fed was so "wise" to "defend" us against the so-called horrors of price deflation, or that in the end such efforts will even prove successful.

First off, what's so scary about price deflation, especially when it's occurring in a grotesquely overpriced speculative asset. Such as housing right now, or Dot.com stocks 6 years ago? Doesn't this enable me to get more for the same money? Or buy at a price supported by the fundamentals underpinning that asset class? How is that a "bad" thing for me or any rational self-interested consumer?

Personally, I think this whole "Deflation Bogeyman" concept is just smoke and mirrors from the Fed, mainly in an attempt to justify/divert attention from their incessant market meddling, bubble bailouts, and (inflationary) interest rate manipulation.

Yeah, Japan tried inflating their way out of their monster housing bubble for the last 16 years with ZIRP and look how well that's worked out for them? Housing prices down 60% in real terms since 1990 and banks STILL holding tons of "zombie" loans on their books that should have been written off years ago. The net result? Housing prices still corrected, but took much, much longer than if the BOJ had just let nature run its course.

Personally, I like to take my medicine quick. If the leg has gangrene, then shoot me with morphine and cut the fucker off. Don't let it fester and spread to other parts.

Imagine everyone, everywhere not wanting to buy anything because it’ll be cheaper tomorrow.

Not in the US. Even if it will be cheaper tomorrow, I want it now. Because I want it NOW!

In the Utopia there is unlimited resource. Minimum wage would be unnecessary.

oh well, that's alright then...

Peter P,

Odds are that the "I want it now" people won't be players in a deflationary economy. Most of them blew their wad in the last 5 years and are up to their eyeballs in debt.

"oh well, that’s alright then…"

I'm game for talking the pros and cons of eugenics now. (for CNBC and in the world at large)

What if they're right?

http://www.contracostatimes.com/mld/cctimes/news/local/states/california/15508482.htm

What's more, Yellen noted, home prices in the Bay Area are no longer rising faster than what could be sustained by general economic growth and demand for homes. Until recently, home prices had risen at a much faster rate than rents. Some economists, including analysts with the UCLA Anderson Forecast, had expressed concern in recent years that the increase in California home prices was not justified because rental rates had not kept pace.

Snaith noted that sectors such as professional services, health care, leisure, hospitality, retail, and even technology and manufacturing, have demonstrated some strength in the Bay Area and elsewhere in California during the region's recovery from the recession.

Quick! Help me counter this!

Odds are that the “I want it now” people won’t be players in a deflationary economy. Most of them blew their wad in the last 5 years and are up to their eyeballs in debt.

They will still want it "now". Remember, debt = wealth, especially if the Fed lowers rate to 0.25%.

Sean Snaith, an economist who tracks regional economies in California, has opined that the Bay Area at worst would endure a housing soufflé that weakened slowly, not a bubble that evaporated.

A soufflé does not weaken slowly. A hole will appear and Grand Marnier will be poured in.

Quick! Help me counter this!

Is my answer satisfactory?

Mankiw quit his fed job?

sorry

fed = federal government

I’m game for talking the pros and cons of eugenics now.

hmm, social Darwinism, at least. vive survival of the fakest, à la dubya, david lereah, millions of attorneys, the chattering class, the entire ruling class, etc...

SQT,

Sorry, I didn't mean to object. I just didn't realize Mankiw stepped down from his post at the council of economic advisors. I must have missed a news cycle somewhere.

He writes quite a few of the introductory economics text books.

Actually, I'm quite serious. In the US, eugenics tend to be a slur and have negative connotations associated with Nazism and Southern White bigotry. But it ought to be a seriously and openly discussed in public discourse. How government policy effects the gene pool (and how the government knowingly chooses to educate its children) will effect the future makeup of this country.

Doug H,

Since I've spent a great deal more of my life on the "sell side" vice the "buy side" I really revel in it when given the opportunity. I'm not out to make enemies b/c everything I share is in an effort to advance the process. One of the things I'm sure you've noted during this "escalation of commitment" is that there's a point where the seller realizes he doesn't have some "newbie" on the other end of the phone.

There's a pause, an awkward, uncomfortable pause. He's trying to figure out how to "disposition" the call/conversation. Most times they'll decline, but once in awhile they'll "buckle" and you have to go after them. It's all over.

It's the type of buying expertise you see employed by larger companies where the vendor is really just trying to get their foot in the door with the promise of bigger volume down the road.

How do you work the scenario when it really is a ONE TIME transaction like a home purchase? How do you create a sense of urgency within the seller's mind that would lead him to believe this could be the "first of many" deals if he plays his cards right? That's really the only leverage I've ever been taught. I'd like to know how to pull that off!

it was a popular topic in UK and US right up until the nazi atrocities, then fell out of favour for some reason. some new human rights-based ethical philosophy came along to fill the gap at that point...

we don't do enough eugenics with our pets -- i only had one cat that was intelligent enough to answer to its name, and it accidentally had two kittens who were both neutered, so that's the end of that line. if i'd found another intelligent cat, i could be breeding a new super-intelligent race of cats now, possibly even working on breeding in opposable thumbs... or maybe i should focus my efforts on lower order primates...

"not wanting to buy anything because it will be cheaper tomorrow"

Well...... yeah I can go along with that in principle but I object to the notion of "anything". Not everything is overpriced! I find that most things are pretty reasonably priced (except wedding photographers) sheesh! Anyway, that's a whole other topic.

Buyers have the right to sit on their wallets until we see some restoration in the relationship between incomes and housing prices! I think we have a long way to go before we worry about HARM's Deflation Bogeyman!

The major critique of eugenics is that you're playing God. Modern westerners, even non-Christian ones, are hesitant about playing God. And in my opinion, rightfully so.

The major critique of eugenics is that you’re playing God. Modern westerners, even non-Christian ones, are hesitant about playing God. And in my opinion, rightfully so.

The central bankers play God, don't they?

I am a supporter of eugenics, although I do not believe in genes. Perhaps intellectual/cultural eugenics.