Naturally everyone wants to get the most home they can for the least amount of money. Which is, of course, in opposition to the home seller, who wants the most money for their home. This inherent conflict is one of the things that makes real estate sales”¦ challenging at times.
It has been my experience of late that home sellers in Phoenix are becoming much more realistic. While it used to be quite common to hear sellers say things like, “But my neighbors house sold for x dollars last year!”, sellers seem to be getting more realistic when it comes to their home’s value, as depressing as that may be.
Home buyers on the other hand almost seem to be losing their grip on reality.
Here are some examples of communication we have received lately:
- We’d like to offer $30K under list price”¦
- I want a single-family detached house in Scottsdale, on a golf course. I can spend up to $150K”¦
- I need a home less than three years old, NOT in a HOA”¦
- We just foreclosed last month and are looking to buy. I think our credit is horrible, and we don’t have any down payment money”¦
- I need a smoking deal on a bank owned home or short sale. I’m willing to pay 50% of list on multiple properties”¦
- I refuse to pay a dime over list price on a short sale or bank owned home”¦
I could go on and on.
The answer for all of those comments above is “you can’t do/get/buy that”.
Here’s the deal. Much of this type of thing comes from simply not understanding what is happening in the real estate market. And by “the real estate market” I am not talking about what you hear on CNN or even your local evening news / newspaper. You need to understand what the market is doing in the specific area you are interested in. “The market” is just too broad and real estate is hyper local.
As a home buyer, you can’t be expected to truly understand your local real estate market. Most people buy a home every 7 ”“ 10 years. We are up to our necks in this stuff every single day. That doesn’t make real estate sales people better than you, or smarter. It’s just what we do for a living (and sometimes I ask myself why in the world I’m doing it”¦). Helping people determine the nuances of their local real estate market is what we get paid for (and why, to be brutally honest, it is very frustrating to have our data, attempts at education, and advice questioned repeatedly ”“ or ignored).
At this moment in time, the average price of a home in the Phoenix Multiple Listing Service is $175,509. That number is for the entire Phoenix MLS area, which includes all of Maricopa County and a significant swath of Pinal county. That is a HUGE area ”“ almost the size of the state of Massachusetts.
Listen to the mainstream media and you’ll often hear the average priced batted about ”“ it’s rising, it’s falling, it’s hopeless, it’s recovering.
So what does an average home price in the Phoenix area of $175K mean?
You want a home in Phoenix proper? Average price is $132K
Scottsdale? Average price is $639K
Gilbert? Average price is $221K
El Mirage? Average price is $79K
You see, when you lump every type of home in a 10,000 square mile area into one number, it swiftly begins to become meaningless.
So let’s drill down a little bit. . .
$639K average home price in Scottsdale? What does that mean?
Only slightly more than absolutely nothing.
Right now I could sell you a condo in Scottsdale for $32,000 (but it’s not on a golf course). Or a (really) nice home for $15,000,000. About all the average price tells you is that generally, homes in Scottsdale cost more than say”¦ homes in Gilbert, which are more, generally, than homes in El Mirage.
Here is where being a “realistic buyer” comes in to play
It is a waste of your time and your agent’s time to try to find homes that simply do not exist. That part is relatively easy to educate, and provide hard data to back up that education. Want a golf-course lot single-family home in Scottsdale? A quick trip to the MLS shows you have 323 options, and the five lowest priced ones are: $295K; $350K; $394K; $410K; and $424K. You simply can’t get one for $150K — it does not exist. Don’t waste your, mine and our time looking for one.
You want to “steal” a bank-owned home for 50% of list price? Consider this”¦ In Feb 2010, there were 2,822 lender owned properties sold, at an average of 98.48% of list price. How many do you think were sold at 50% of list price? While I have not looked at all 2,822 sales, I’m quite confident in saying that number is zero. You can’t buy REO properties in Phoenix at 50% off list price. That’s not a realistic expectation.
That’s all hard data ”“ you can’t argue with it (though many do).
Were it gets tough is on some of the more nebulous requests from buyers. You don’t want to offer a dime over list price on a short sale? Well, here is where you may have to rely on your agent’s expertise. I can tell you (and show you) that there are oodles of short sale listings in the Phoenix market priced woefully under market value. We could spend hours pouring over current listings and past sales to demonstrate this. But that’s not an effective use of your time (or mine). And it is still a difficult thing to prove. The problem is, there are listing agents out there with the nasty habit of grossly under pricing a short sale in an effort to generate an offer and/or bidding frenzy. Offer below list price on a home already priced lower than the bank will accept and you are looking at an exercise in futility.
When you are buying a home, you have to be realistic. You aren’t going to get everything a $500K home has to offer for $250K ”“ it just doesn’t work that way. You’re not going to steal a home from a bank, no matter how much the banks annoy you or how much they got in bailout money. You aren’t going to live a Scottsdale lifestyle on an El Mirage budget.
Please please please, for the love of all things good and the little fluffy bunnies, don’t think for a moment that I’m saying all buyers are unrealistic, or that no one listens. Buyers are smart. Smarter than a lot of people, including many listing agents and sellers, give them credit for. Yes, it is frustrating when a buyer won’t listen, or doesn’t believe what we say. Given the general mistrust of real estate agents in the public’s eye, I understand that reluctance to believe. I understand we have to prove we know what we’re talking about. We have to earn your trust. Once that trust is earned however; take advantage of it! Believe what your agent is telling you. I can assure you that they want to sell you a home as badly as you want to buy one.
Think about what your expectations are, and work with your agent to see if they are realistic. It’s OK to ask for as much proof as your agent can provide. Realize though that some things are difficult to prove with hard factual / statistical data. Sometimes empirical data (based on observation and experience) is all you have to work with. Combine the two, work closely with your agent, build that trust and get out there and find that perfect home!
Just be realistic. It will greatly reduce your stress level. And your agents. Remember, real estate agents are people too. (At least most are most of the time”¦)