It's March Madness once again which means that it's time for everyone in the Gardner family to fill in their winning brackets. Not surprisingly, I'm forced to guess at who the winners might be - basketball being of little to NO importance to me. "Ummm - Go Wildcats?"
"What's the ranking?" I ask Cliff as he forces me to pick a team.
"Number 14 plays number 12, number 7 plays number 10, number 3 plays number 5 . . ." and so it goes.
"I'd like to phone a friend." I say.
"No," he replies, "you have to pick your teams now."
As self-appointed "Commissioner for Life," Cliff is really starting to get on my nerves.
While I've learned a bit about baseball over the years, neither of my boys actually participated in basketball, which means any interest in the game is purely manufactured by my overly-enthusiastic husband. Sure, I suppose all that action is exciting, but that doesn't mean I follow the college teams OR have an inkling of how one will fare against another - nor do I much care. (Now talk to me about who will win "The Voice" and that's another conversation altogether.)
Here in the world of Real Estate, we've got our own version of March Madness taking place as the market continues to heat up and more and more Buyers join in the game. In many cases, these new Buyers are just now entering the big leagues, but for others, this isn't their first time shooting for the hoops. In short, many have come to play and they are looking for a decisive victory.
In case you think only Buyers are feeling the heat of the moment, Sellers too, have their fair share of pressure. Caught up in the whirlwind of expectation, Sellers can find themselves disappointed when only a few great offers present, instead of many. Purchase offers which would have been considered home runs in any other market (yes, I'm mixing metaphors here) are now viewed with distress and displeasure. (Sigh.)
What's that mean?
It means that expectations need to be managed on both sides of the transaction. Buyers need to be clear about what they can actually afford (understanding that most houses are selling significantly above the asking price) and Sellers need to realize that the market DOES have a breaking point. In other words, your house isn't selling for a million dollars over the list price simply because you want it to.
How do we compete?
Serious Buyers have done their homework upfront, understand market value, are preapproved through their lender, and are willing to write a highly competitive offer that's meant to be a clear winner. (Don't stand at the free-throw line if you aren't aiming for the basket.) Honestly, if you're not tossing and turning just a little bit at night, you probably haven't offered enough. (Gulp!)
But how does that make sense?
It may not in the short term, but buying a home isn't meant to be a short-term investment. (Some would tell you a home isn't meant to be an investment at all.) Moreover, buying a home in a quickly escalating marketplace often means that you are buying future appreciation and that's a BIG-PICTURE concept.
If you plan on staying 7-10 years in the property, paying "too much" in today's market is of little consequence. If, on the other hand, you may be looking at a job transfer a few years from now, renting is going to be a much safer bet. Think long term and let that be your guiding force. (BTW- paying "too much" is largely a matter of perception and fear. Buyers pay what the market will bear and there's no shame in that.)
What about if I find a "fixer" and remodel instead?
Now you're talking my language, but don't bet on it. "Fixers" are highly popular and you'll nearly pay retail for the privilege of promise. Moreover, they rarely pencil out. Buy a "fixer" if you love the process and have the means to actually "fix" the house, otherwise, leave it to the professionals and find something more "turn-key" and far less stressful to meet your housing needs.
How about if we sit on the bench for awhile?
It's an attractive idea in the face of all the high-level competition, but time is money. Had you bought last year, you'd have undoubtedly spent far less than you will this year. Additionally, none of us knows what next year will bring. Certainly, the market is continuing to trend UP and has been for the last several years, but if you want to be a spectator for a year or two, no one would blame you (certainly, not me).
On the flip side, "timing the market" is an impossible feat; I've yet to meet the person who can outsmart the marketplace (and I know A LOT of very smart people). The truth is, we only ever know the market trajectory in hindsight (yes, even those of us who work in the business). Those who bought at the bottom may be congratulating themselves, but realistically, they were often more lucky than right. They took advantage of good timing and that's great, but the ONLY time, you really need to concern yourself with the "value" of your home is when you GO TO SELL IT!
Surely the bubble will burst at some point.
If history serves as a marker, you are probably right, but just when is anybody's guess. Short of a major disaster, the market doesn't appear to be waning anytime soon (It takes FEAR to significantly impact the marketplace.) but historically, even when the market corrects, it tends to rebound with force within a few years (again, think long term). With strong Bay Area employment, improved job growth, low inventory, amazingly affordable interest rates, and year-round sunshine, it's tough to beat the California dream. (Have you seen the weather on the East Coast this year? Brrrr.)
I'm not sure I can handle the intensity.
Don't worry, you're not alone; I'm on your team and as your coach, I'm going to encourage you to do the best you can, play your hardest, lead with your heart, and fully commit. Anything less is bound to bring half measures.
At least with the majority of opportunities, we will know who and how many other buyers are competing, we'll look at comps and measure the nearby sales, we'll read the disclosures carefully, we'll strategically write an offer that's meant to carry weight, and then we'll proceed with good faith and speed, knowing we've done everything we can. After that, the rest isn't necessarily up to us, and while the news may prove frustrating on some houses in which you bid, even defeat prepares us for the next round.
Hey, let's hit the court running. Nothin' but net!
How can I help you?
I walked into Target thinking I needed laundry detergent and dog food (yeah, right.). Three-hundred and eighty-eight dollars later, I came out with not only the two items I had intended to buy, but granola bars, paper towels, new shoes, white kitchenware, shorts and shirts for the boys, and a list of other items I hadn't really intended to purchase, but couldn't pass up.
AS it turns out, there's a big divide between what I need and what I want (and a price difference as well). I'm fairly certain that's what retailers are counting on from their customers. In fact, there's an entire science behind it. What we think we want and what we really want are often two very different stories altogether.
In some respect, Buyers operate the same way. We'll begin with a long list of what they DO and DO NOT want in their next home, but until they step inside, they often don't really know.
"We want a big back yard with easy 'walk-to' accessibility and a gigantic garage."
"I really need all-level living and room for an in-law or au pair."
"Don't show me anything that isn't 'turnkey' with a luxurious master bathroom and kitchen."
Cut to: an excited phone call from your buyer at a house waaay up the hill with decks and NO backyard to speak of, OR inside a very vertical modern on four levels, OR on their way to a fixer in need of major overhauling . . . and you have an inkling as to what the average day of a Realtor looks like. (It happens more often than you think.) It's not that "all Buyers are liars" as the saying goes, it's that most Buyers really don't know what they want and with so many choices a simple click away, it may be harder to narrow the field, not easier.
As helpful as the Internet is, it can also be overwhelming. Until we physically get into a home, we can't really understand its strengths and weaknesses - or have that "ah-ha" moment. After refusing to even look at my last house because the street did little for me, I finally wound my way down the steep driveway (out of sheer frustration at the lack of available inventory) only to fall truly, madly, deeply in love with the gazebo and the setting. The 1950's house itself, I was less than ecstatic about, but was certain I could fix - and so I did. (Cliff had some input too, of course.) Such is the nature of the home search. In many respects, it defies sensible explanation. Largely, because it's more emotional than pragmatic.
Add to that a market that doesn't offer up as many listings as one would hope for, and panic can set in. Thus it's imperative that you keep an open mind and see as many opportunities as possible while in the hunt. This is where the Sunday Opens come in, allowing one to see a lot of houses in a short amount of time. In practice, finding a new home is almost a full-time job.
Once inside, remember that you're essentially auditioning for the role of future owner so any criticisms you have about the house are best kept between you and your REALTOR. When you have the disclosures in hand, you can drill down on any perceived shortcomings and the potential repairs that lie ahead. Remember, when you are competing against others, the listing agent wants to hear how committed you are - not how critical you can be. So mental note - when in front of other agents, give a property nothing but praise.
But we are spending a lot of money on the house and we want it to be perfect!"
Of course you do. Would it help to know that no house is perfect and I truly mean NONE of them, regardless of how high the price point? (It's true.) Every property has flaws, whether it's a starter home or the GRAND estate. I've yet to sell a house to anyone (even to those for whom price has little baring) who didn't raise an objection or two.
In fact, it's part of the natural process. Every Buyer has to overcome objections in order to buy. The tolerance for these inconveniences is really as individual as the properties themselves and your willingness to take them on - or live with them as is. (That's actually an option too.) As with your mate, once you actually fall in love, you'll very likely overlook many of these insignificant hurdles.
Some defects are inherent, meaning they will remain ever thus, such as the BART station outside the front door or winding streets, and require careful consideration, while others, such as old kitchens and bathrooms, are easily resolved by cosmetic improvements. (Okay, maybe not exactly "easily," but you get my point.) Putting in a closet is a whole lot easier than changing traffic patterns.
Serial renovators such as myself, love these kinds of challenges, but I'm in the minority and for very good reason. Renovations are costly and messy affairs at the very least, and they very often DON'T pencil out. In short, you gotta love not only the concept of renovation, but the actual day-to-day inconvenience to take one on, but that's another column for another day. (Check out my Blog renovationriptide.com)
Whatever home you ultimately decide on, the journey is much the same: select an agent, define the perimeters, narrow the hunt, hone in on a community and architectural style, lock a loan, thoroughly read and sign off on the disclosures, conduct inspections and research, write an aggressive offer, get into escrow, transfer the good-faith deposit, order inspections, put homeowners insurance into place, order title insurance, remove contingencies, sign closing papers, transfer the funds, transfer title, record the transfer of sale, close escrow, pick up the keys, and pack and move! Congratulations, you're a new homeowner.
If only it were that easy!
Because it isn't, let's make sure you truly, madly, deeply fall in love and then you'll be ready to battle. In a market that's quickly escalating and offers too little inventory for far too many Buyers, the victory goes to the fearless and to those who are emotionally committed to the process. If you aren't, it's not your house. (Trust me on this one.)
Don't worry, we'll find it. It just takes a little faith and a LOT of ground work (but it also expedites the process if you can reconcile what you want and what you need.) If price allows, you can have both!
How can I help you?
The game stood at 5-8 going into the final inning with Head Royce in the lead and their relief pitcher on the mound. Piedmont sat in the middle of its batting order and we needed three runs to tie (four to win) against what was clearly a very talented team.
"Let's go Piedmont!" the hometown fans screamed.
"Defense!" the Head Royce parents responded.
This was the moment . . .
Our four and five batters were walked, followed by a rare fielding error by their second baseman that resulted in a run for Piedmont and left runners at second and third base. Suddenly, things had changed in our favor (that's the beauty of baseball) and the tying runs were on base with the winning run up at bat.
"Strike one, Strike two, Strike three!"
That's okay, we only had one out with bases load. Our boys were fully capable of pulling out the win. We'd seen them do it before. In fact, we'd just come off a weekend of resounding victories over Stevenson in Monterey so momentum was on our side. The next player approached and was intentionally walked to set up the double play. Now we had a game. We whistled, we stomped, we cheered.
This is baseball at its most nail-biting glory. A G O N Y!
"Strike one, strike two, ball one, strike three . . ." two down, one chance remaining.
Now at the top of its batting order, Piedmont had one last opportunity to keep the game alive. The parents collectively held their breaths on both teams as the next batter walked to the plate to take his turn at bat (no pressure). This was do or die.
With two strikes and two balls, the batter swung and popped the ball short to right field. Out number three and the game was suddenly over leaving three men on base (sigh). The boys had put up a good fight, but had been beaten. It's a crushing blow to come so close only to lose, but they'll undoubtedly live to fight another day.
Listening to Coach Olsen after the game, he praised the boys for playing all 21 outs to the end, giving it their all, and working diligently on the field, but reminded them to tighten up their play and avoid costly errors. "If we can do that, next time the game will break our way, instead of theirs." (I love that kind of cool, collected response in a coach.) It's undeniable that losing hurts, but when it becomes a teaching moment, there's at least a silver lining. (The boys won't "get" that until they have kids of their own, I suspect.)
In many respects Coach Olsen's words are not dissimilar to the pep talk I give my own clients when they are struggling with a home purchase. For many Buyers, there's a learning curve that's unavoidable as they get up to bat and strike out - often more times than once, and in a few rare cases, with some regularity. Ouch, that's no fun. (I hear you.)
Sometimes a loss is unavoidable - a stronger buyer beats you out in an ALL CASH play and comes in MUCH higher. (Let's wish them well and move on.)
Sometimes it's indecision. You didn't want the house enough to compete at the highest level for it. That's okay; let's find you the home that makes you swing for the fences. This market doesn't allow for the short pop-up or lukewarm response. Truly, the victory will go to the player who buys emotionally and not pragmatically. You gotta really WANT it.
Sometimes, it's a lack of preparation. In a competitive marketplace such as this one, we're going to need ALL of our ducks lined up in a row in order to beat out the other players who come up to bat. This means, a letter from your lender qualifying you for the loan and verifying your closing assets, pre-inspections on the property when allowed, and the removal of nearly every contingency in the contract when possible. (DON'T do this if you haven't gathered the appropriate information beforehand and aren't comfortable with the risks involved.)
Sometimes it's an error on the Agent's part. Given two strong offers, I am going to encourage the Seller to select the one that's left no stone unturned. The agent with the cleanest presentation signals (to me at least) that the transaction to follow is likely to run more smoothly.
Hey, batter, batter . . . it's not just about getting on first, but getting to home base that matters. If the deal start out rocky, it's probably not going to improve as we progress, and if there's a hitch in the escrow or lending process, it may be game over. That's definitely a scenario we want to avoid. Homes that fall out of escrow can become quickly tainted, thus agents with good batting records are worth their weight in gold.
Finally, I love what my husband often reminds me about the game of baseball: "the ball is round, the bat is round, but you've got to hit it square." (I don't think he said it first, but it certainly applies.)
That sentiment applies to the world of Real Estate as well. Whether in a Buyers' or a Sellers' market, it's critical to prepare, to make adjustments as you go, to learn the game, to play hard, to avoid mistakes, and to give it your heart.
Hey folks, that's not only baseball or Real Estate in a nutshell; it's life. I find that when we set our intentions and do our best, we will win more often than not, BUT even when we are really great at the game, we still won't win the battle every time. That's okay, we'll tighten up, learn from our mistakes, and live to play another day. "Batter up!"
How can I help you?
Julie Gardner, has been writing The Perspective for 15 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.