​The downside to selling in a seller’s market

Imagine the following: you are looking for a new home.  After careful searching you find “the one.”  Financing has been lined up and you are even going to offer more than list price. Confidently, your agent submits your well-crafted offer.  You are notified a few hours later that the offer has been REJECTED.  Dumbfounded, you learn later the house sold for tens of thousands of dollars above asking price.

Take that anger, confusion, frustration and disappointment and multiply again and again. Now ask yourself, how motivated will you be to submit an offer on the next home? Unfortunately, this feeling is more common among buyers than ever and it’s now hurting sellers.

The excessively strong and prolonged seller’s market is now detrimental to sellers.  This is counter-intuitive since one would assume that the stronger the seller’s market, the faster and for more homes would sell.  After all, this is what the economics textbooks teach us about supply and demand, yes?  A limited supply with ever increasing demand ALWAYS results in higher prices.  But in real estate, these days at least, it’s not the case.

The economic textbooks are flawed because they assume buyers rational, logical, unemotional creatures whose sole purpose is to maximize utility.  Instead, humans are wild beasts a few DNA strands away from feces-throwing chimps.  Humans have emotions, knee-jerk reactions, and very often, a complete inability to change an opinion or belief, even when there’s overwhelming evidence contradictory to theirs.

How this matters to sellers is quite simple: buyers (and their agents) are tired of bidding wars.  It is emotional taxing to view a property, fall in love, submit an offer, get hopes up, and ultimately be rejected again and again.  It’s hard on buyers and for lack of a better term, it’s hard on “weak” agents.  Not wanting to get involved in a bidding war results in fewer offers, resulting in more days on market and very often, price reductions which do nothing more than increase the number of available buyers, which in turn makes buyers believe the likelihood of a bidding war is now higher!

Like a good politician, I have highlighted a problem and offered no solutions #Britton2020. Perhaps there are no solutions?  Perhaps we simply need the market to become more balanced, which it should in the long run, theoretically.

However, as I recall experiences I have had with some clients, the solution could be rather simple, albeit not easy.  Buyer’s agents must keep their own and their client’s emotions and expectations in check.  Without exaggeration it takes me 8 minutes to write an offer.  This isn’t a lot of time and is well worth it when the potential payoff is getting someone a house.

To all agents, stop being so lazy!  Manage your buyers, insist on submitting offers, and eventually you will be rewarded.  If you do not work harder and smarter, you will not be around when the market balances out.

To all buyers, buying a house is tough.  Accept it, deal with it and overcome it.  And if your agent is milktoast about submitting an offer, it’s time to find someone else.  

You will never buy a house if you don’t submit an offer.