"Hey, you look exactly the same," my friend e-mailed me, after receiving last week's Perspective for the first time (thank you Photoshop). Ronna and I met in San Francisco when our kids were in preschool together at Temple Emanuel and at the risk of giving away my age, that was nearly 20 years ago. So while I wish I still looked "exactly" the same, I'm not even close.
I was once again reminded of that fact after getting talked into Boot Camp by my good friend Karen, the work-out queen. Not only does she hit the gym daily, she plays competitive tennis, swims in a masters' program, and power walks the steep hills of Piedmont, so she's not just fit, she's SUPER-FIT!
Me? I'm pseudo-fit. I put up a good front, but it's all smoke and mirrors (and creative draping). After two weeks of working out, I'm definitely feeling the burn from those relentless squats (Ugh!) and I'm discovering muscles I haven't used in quite some time. Did I mention that I'm getting up at 5:30 IN THE MORNING! (that's a.m.) to put myself through this torture (say what)? For a girl who used to teach aerobics, dance professionally, and perform aerial acrobatics in the circus, it's humbling to say the least. Let's face it, only children look forward to aging. (My teenage driver-in-training can't wait to turn 16!)
Of course, this got me to thinking about the muscles we use with respect to Real Estate, which is to say that buying or selling a home isn't something one typically does every day, every month, or even every year. Unless you are a professional "flipper," are being relocated on a regular basis, or are unlucky in love (sadly, divorce is a key driver in real estate sales) the reality is that, on average, Buyers and Sellers will likely enter the California marketplace only once every 5-7 seven years.
What about the rest of you?
Many of you will live in your homes for 20 years or more as you transition through the parenting stage before seeking a "buy-down" residence, OR a change in lifestyle, OR new geography altogether. A handful of you, will stay on indefinitely in the homes you bought early on or inherit the one you grew up in from your parents (lucky you). With lengthy time gaps in-between these MAJOR transactions, is it any wonder your muscles have atrophied? And just like me, who's returning to exercise after a way too-long hiatus, it can be hard to keep up. (It can even hurt!) In other words, your muscles aren't necessarily in shape when trading real estate; they are simply no longer toned. So, one of the things I often need to do when I take on new clients, is to work on your fitness with respect to the market and where it currently stands. In essence, I quickly become your personal trainer, "Drop and do 20!"
Okay, forget the push-ups, but I will send you to Sunday Opens, I'll encourage you to get pre-approved for a loan, and I'll pull comps for your review as I work to bring you up-to-speed. I will force you to read the disclosures (all of them), I'll debate with you vigorously, I'll undoubtedly challenge your thinking, and occasionally, I will disagree with your conclusions (it makes us both healthier). I know that the faster you shape up with respect to what is real and what is imagined, the better off you will be and the better your results. (BTW, it isn't necessarily any easier on my end, people don't like giving up their illusions.)
Last Week, The GRUBB Co. invited it's own trainer to our weekly Tuesday morning meeting, Carole Rodini. Ms. Rodini is a no-nonsense, shoot-from-the-hip, take-no-prisoners, highly-respected, top-notch economist and an expert in the field of Real Estate (in other words, she's my kinda gal) and best of all, she's incredibly straight-forward.
Carole lectured for nearly an hour without pause (I'm not kidding, this women barely stopped to breathe) and enlightened us all. I've had the privilege of "working out" with Carole before, but she never fails to exercise the brain as she shared her observations about Real Estate, the economy, politics, world views, our local market, and the future for them all. (Whew! I can only hope that I'm as relevant at 68.)
I can't begin to pass along ALL of Carole's pearls of wisdom in the limited space here, but I will say that she predicted that both the market and the interest rates will tick up measurably this year. (Interest rates can't really get any lower - the prime is nearly at zero.) In fact, home prices are already rapidly rising, as any Buyer who has actively been in the Spring Market can attest to.
For those of us on the service end of things,it feels dramatically different than last year's much slower paced market (it's literally turned on a dime!). Interest rates will undoubtedly rise more slowly than will home prices, but they aren't expected to go down any longer and the fees associated with them will definitely go UP! So if you are waiting for values to continue to soften, unfortunately, you have already missed the mark (at least here in Piedmont).
Every Buyer I helped purchase a home last year, did extremely well and is now in good position for what lies ahead. While I'd like to personally take the credit for their good fortune, the truth is that they were lucky enough and smart enough to hit good timing. Last year's Buyers capitalized on the very bottom and next year's Buyers will likely wonder why they didn't purchase in 2012!
Carole Rodini closed her talk with this tidbit about multi-billionaire, Warren Buffet, who said (and I'm paraphrasing, as did she) that every market is either a Buyer's OR a Seller's market. The trick is figuring out which one it is and then quickly shifting to the other side of the table. That philosophy of recognizing the shifts in fortune and then running from side-to-side when appropriate, seems to have worked pretty darn well for Mr. Buffet and Ms. Rodini. Hmmm. . .
I bet they work out.
"You evidently walk on water," a prospective client e-mailed me. "My friend, Carol, raved about you . . ." Gosh, that's nice to hear and I love the validation, but were it only true! While I'd happily lay claim to the ability to casually stride across H2O, the only water I'm walking on these days are the puddles that last week's heavy storms brought en masse. (Help, my roof is leaking. Quick, somebody get a bucket!)
Unfortunately, I've spent the past month writing offers that have come in second and just between you and me, it's less than thrilling news to deliver to my earnest Buyers, all of whom have written with strong conviction.
Let's face it, "back-up" position isn't my goal for you and I know it isn't yours either; securing the home, is.
It's doubly difficult to deliver disappointing news when these excellent offers should have been high enough to carry the day - and would have been just a few months ago. But therein lies the problem; we can't work on last month's numbers or even last week's. Those comps can only represent past sales, not future activity or even today's current market performance.
In order to come out ahead, you must accept that the numbers aren't driven by last week's sales, but by this week's Buyers, who are quickly increasing in number and magnitude. (The public offering of Facebook is set to create 2,000 new millionaires alone and they'll be entering the market in the next year or two. Talk about stiff competition!) So while the basic math of surrounding sales certainly informs our offer, it doesn't begin to tell the whole story - does it?
So what happened?
What "happened" is that the market reached its "Tipping Point."
In response, focused, committed, and knowledgeable Buyers are flooding in to take advantage of rock-bottom interest rates and opportunities they now recognize are rapidly on the rise. With little inventory from which to choose, the few good, available homes are selling quickly and often, with surprising results, as evidenced by the slew of multi-million dollar sales San Francisco has recently been experiencing. (Hey, SF Buyers, come on over to Piedmont. We're downright affordable when compared to pricey SF real estate!)
Given the increased pace of activity, it's critical that you understand that this isn't a negotiator's marketplace any longer, it's a competitive one - certainly here in the Bay Area anyway (If it's negotiation you seek, you'll need to focus on the properties no one else wants or alternatively, move to Modesto?) With multiple offers from which to choose on too few good properties, you may only get one shot. In other words, don't over think it and DON'T hold back. While it may be tough for Buyers to shift their thinking so quickly, the reality is that each new successful sale drives the price of the next, higher still. As has always been true, "value" is a moving target, which is why it can be incredibly difficult to craft the winning bid.
"I don't envy you," a friend said over the weekend, "How do you do it?"
I do it with faith and the understanding that Buyers are often well served and educated by these near misses (no experience is ever wasted). I know that each missed opportunity fine tunes the next and while it may be difficult to have "faith" in the moment when you have just lost the house you dearly coveted, there will be others (there will). While competition is WAY up, so too is Buyer optimism, and that's a very positive change after the last four dismal years. Once again, Real Estate has become a valuable commodity.
(BTW- both faith and one's ability to recognize and define "value," improve with practice! Granted, I've undoubtedly had more practice than you, but I have faith in your ability to catch on quickly, even in a dramatically shifting marketplace as this one is clearly shaping up to be. With the Internet at everyone's fingertips, Buyers have never been more astute.)
So no, I don't walk on water (I'm way too fallible for that) but I have spent a good deal of time swimming in it. AND I've learned that the best way to achieve your goal, is to swim with the tide.
Quick, grab a swimsuit and some flippers. Unfortunately, the towels are now on my living room floor sopping up the rain!
After last week's "unfriendly" beating at "Words With Friends," I invited "Rickster55" ("Rick" to his friends and family outside the gaming world) and his wife, Amal, over for a good old-fashioned game of cards at our home instead and redeemed myself by summarily beating them all. Not that I'm SUPER competitive or anything, but "Winning!" feels so much better. (Charlie Sheen may have been crazy but he wasn't entirely wrong.)
Like most card games, this one involves a bit of good luck, as you trump one another to take tricks with ever increasing hands. (Tricks aren't necessarily just for kids). But irrespective of the aces, kings, and queens one is dealt, the real skill set is more about identifying your options, sizing up the potential competition, committing to a bid, and then meeting the number you have set. This is easier when the hands are still small, but as they increase in size, it gets much more difficult to calculate what everyone else will do and how everyone else will play. Hmmm . . .
That's true of Real Estate as well, where analyzing the competition is critical to the success of the deal. The more popular a property, the more scare the supply, the more anticipated offers . . . the more difficult this becomes. While identifying the home may seem like the hard part, it isn't. Figuring out what to bid, IS!
"What's this house going to go for?" is the question I'm most often asked, when a Buyer finally identifies the home they'd like to purchase and we suspect the competition is going to be stiff. To which, I must reply,
"What is it worth to you?" In other words, "How competitive are you willing to get?"
Until I have a clear sense of the other interested parties, the Agents representing them, and the Sellers' motivation and expectations, anything I say in that moment is going to be nothing more than a shot in the dark. In order to advise you in a meaningful way, I've got to dig much deeper before offering an opinion of "value."
But truth be told, even if you are the only interested Buyer at the party, it's still uncertain what a Seller will be willing to accept come the offer date. When pressed, I may throw out a potential number, but until I've gathered more facts, asked pertinent questions, read the disclosures, and have studied and analyzed the market in whole, anything I say is just an estimate.
Without knowing what someone else is willing to write, how strong their motivations may be, or how DEEP their pockets actually are, we can't really know how the hand will ultimately play out or where the price may finally land. And while I might steer you toward a number that I believe will more than likely keep you in the running, I can't tell you how much risk you should be willing to assume, OR what you should pay either. (That's entirely up to you! )
However, we can discuss what other "like-kind" properties have sold for in the neighborhood, the heft that other Agent's offers typically bring to the party, whether "values" are declining, holding steady, or climbing, and with further inquires, what the Sellers might need or want - (a rent back? additional time? a quick close?). All of these details inform us, so they become significant as we craft a winning offer - or at least a viable one.Ultimately, "value" is always going to be subjective.
What's a walk-away property for you ("I can take it or leave it") may be someone else's non-negotiable proposition. As such, they're likely to be willing to pay more when faced with competition, in order to secure the home.
What if two or three offers are close in price?
When price has been determined by the market, the TERMS become critical. If two or three offers come in at - or near - the same price and one is "ALL CASH," it's very likely to trump ALL other offers at the table. With the ability to waive inspections and loan contingencies AND the advantage of closing in as little as a week, an "ALL-CASH" bid is difficult to pass up, even for higher financed offers. (Winner, winner, chicken dinner!) Unless you are the fortunate ALL- CASH Buyer, there's nothing to be done, but move on to the next opportunity.
Still, you might consider tightening up your time frames and increasing your down payment in order to improve your chances considerably. It may not be an "ace up your sleeve," but it should provide the makings of a solid hand. With good planning and a thoughtful strategy, you will have a better shot at securing the home and emerging the victor (because there's no denying it - "winning" does feel better.) Once you've done the best you can do, the rest involves a little timing and some luck.
Care to deal?
Tweet! My phone chirped. "Rickster55" had made his play and it was now once again my turn. That sweet little chirp was starting to sound like the theme from Jaws. What had started out as a promising and fun hobby between friends, had quickly become my own personal nightmare (primarily because I was getting my hat handed to me and I hate to lose). "Ti?" "Ut?" "Lo?" Huh? Was he kidding me?
What kind of words are these anyway? I was challenging my vocabulary, playing six-letter words, while "Rickster55" was racking up IMPRESSIVE scores with a strategically placed vowel here and there (who scores 48 points with "voy?"). But worse than that, Rickster55 wasn't giving me much opportunity to leverage any of his letters into new words on my end (since he wasn't playing many). I was having to create ALL of the momentum and he wasn't just winning, he was so far out in front, that I had little chance of catching up. (Make that NO chance. I'm beginning to hate this game.)
Clearly, "Words with Friends" isn't very "friendly."
"You're playing the wrong game," my sister, Jill, coached, "You don't score higher points for longer words. This is Scrabble. You have to play the board. Focus on the board." (Ah ha! Light bulb moment!) Not surprisingly, there's a lesson to be learned here with respect to Real Estate as well (Isn't there always?) which is that your home isn't being sold in a vacuum. Whether it's a Buyers' or a Sellers' Market (or one that's mixed) each listing lives within the context of nearby sales, results, and market performance.
Regardless of how special you believe your home to be (and I'm not necessarily disagreeing with you) chances are, your sale isn't going to be dramatically different from the house next door or the one down the street. With few exceptions, there isn't a "triple word" or "double letter" score in Real Estate. You have to scan and play the board - And you have to do it within the framework of any given marketplace. (Light bulb moment?)
With respect to Buyers, it's not only important, it's absolutely critical to size up the competition and adjust your game accordingly.
If five parties are bidding on a home, then it's going to be necessary to dig into your bag of tricks and come up with heavier artillery and some winning strategies if you wish to succeed. (Much like I'll need to do if I continue to battle Rickster55.) And if you are consistently running into tough competition and haven't mastered this learning curve, well then, you are going to be at a distinct disadvantage, aren't you?
In other words, play the board!
Sure, I can write sharp offers all day long if you instruct me to do so, but if they fail to deliver you the home, then you are only succeeding in pushing the sales price and the comps ever higher - without actually achieving your goal. Believe me, losing time and time again, rapidly grows old and it's incredibly frustrating to boot. (Don't I know it.) So get in there, analyze the board, adjust your thinking accordingly, align yourself with the market, and then make your move.
Chirp! Oh dear, there goes my phone again. . . it's my play.
What's your next move?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.