Harried buyers may miss opportunities
Originally appeared in Bay Area News Group publications on September 27, 2013
“We often miss opportunity because it’s dressed in overalls and looks like work.”
– Thomas A. Edison
Everyone loves a bargain. Sometimes, however, a good deal can be missed because value was not recognized. This is surprising when it occurs in a hot real estate market, but it recently happened with several East Bay properties.
Buyers pulled in different directions
Today’s buyers are generally busy people with many responsibilities who, despite the best intentions, cannot devote all their time and energy to searching for a home. Rapidly rising prices and a highly competitive environment make the effort even more difficult.
This is not to mention that buying a house is a complex process that involves a plethora of variables. In addition to price, these include neighborhoods and areas within them, floor plan, size, style, steps, schools, shops, etc.
Attempting to learn about local real estate and then keep track of new listings and sales can be daunting, even for repeat buyers. Over time, especially after failing to prevail in a number of multiple offer situations, continuing a home search may wear anyone down.
We live in a time when all kinds of information is coming at us non-stop. Between iPhones, iPads, laptops, desktops, smart watches, TV, radio and Internet, there is no let-up. When the additional details associated with buying a house are added to family and job responsibilities, it is understandable when overload is the result.
Added to the above, are deficits we all have as humans. There are times that we have a “scatoma,” or blind spot, to certain situations. One of these scatomas might be the unconscious acceptance about how real estate works in a specific market. For instance, many buyers believe that, in this seller’s market, all good properties will be bid up to a higher price. This is incorrect and can result in buyers not noticing or dismissing a home that could work for them. Below are two examples.
Missed value #1
This house is in an excellent location. Over time, the seller had done extensive remodeling and it showed beautifully. It had an appealing kitchen and baths, an excellent floor plan with spacious rooms, hardwood floors and good outdoor living. Freshly painted inside and out, it was in move-in condition.
It was listed at a reasonable price, but received no offers and was taken off the market after two weeks. A short time later, the home came back for sale at a lower price. Now, it received multiple offers and sold well over the initial asking price.
In my opinion, the missed opportunity was when it was first listed. At that time, a buyer likely could have bought this property for less than asking and it would have been a good value.
To be fair, the ultimate buyer may not have been in the market or ready to buy when this house was first listed. Timing is important.
Missed value #2
A contractor purchased a major fixer-upper as a short sale in a prestigious location. The home needed over $100,000 in repairs in addition to the cost of upgrading and remodeling.
Over the next five months, this house was rebuilt from stem to stern. Everything was done with quality and caring, not like a slap-dash “spec” or “flip” (bought for investment to fix up and sell) house.
A lovely kitchen with French doors lead out to a private garden, as did a large master bedroom with a huge, luxurious bath. There were granite and marble counters, beautiful tile work, pegged, random plank hardwood floors, new, cool lighting fixtures, new roof, new heating system, new copper plumbing and much more.
When it came on for sale, the asking price was fair for this high-end neighborhood. After three weeks, and with no acceptable offers, the seller lowered the price by about $60,000. When this did not result in any bids, he took it off to rent and try again next year.
In numerous ways, this home was better in appearance and quality than many newly built ones. The original asking price was less than a host of recent sales in less desirable locations with far fewer amenities. Each of those sold with multiple offers at substantially higher prices than this one, but they started at a much lower price.
Few buyers or agents even looked in the Multiple Listing Service (MLS) to get an idea of what or where the house was. Whereas 400 to 500 buyers, and the same number of licensees, will view a “hot” listing on the MLS, only about 100 of each even bothered to click on this one in its first three weeks on the market. At the same time, some other, higher priced, listings in the same area received multiple bids.
This property was fully advertised, had two broker’s tours and a number of open houses. Nonetheless, to a large degree, it was not eliminated for anything to do with it. Clearly, if people didn’t look, they didn’t have anything to eliminate. There was high value here, but it went undiscovered.
After many years in the business observing how buyers function, I continue to reach the same conclusion: To their detriment, buyers follow the crowd. It is the path of least resistance and few buyers realize there is another way.
The alternate approach is to make the effort and take the time to understand value. Those who do, have a home they can later sell, ending up receiving, rather than writing, a check.