When Is It a Good Deal?

Last night Lesley and I watched the movie “Date Night” with Steve Carell and Tina Fey. It was OK…not the funniest comedy I ever saw but for the most part enjoyable. Anyway, Tina Fey plays a Realtor and in one scene early on she’s showing a palatial mansion to some buyers and as they’re walking out of the place she tells them the house was originally listed for $1,850,000 but it’s been reduced since the market is slower and it’s now available for $320,000. She asks her clients if they want to write an offer. They respond by saying; “No, we think the market is going to go even lower”.

OMG…did that sound familiar! The question is, when is a deal really a deal? Or maybe another more relevant question could be…when do these rationalizations actually amount to inertia? My good friend and blog reader Michelle Kwok sent me a message the other day on facebook. Seems that she was chatting with a friend who told her she was looking to buy a house. She said: 

 “I am not in a hurry. I want a good deal, like paying about 60-70% of the value of the house.” I asked her, “Value now, value in 2006?” Turns out, she wants to buy a house and pay 70% of the current value, in Redwood Shores, Palo Alto, Menlo Park.  And then she said, that she is patient, and is willing to wait for short sale/foreclosure.”

It’s funny because I had a guy I worked with, temporarily, about 5 years ago who told me roughly the same goal. Not sure what happened to him. It’s just, knowing what I do about the market around here, it’s hard to take seriously a buyer who states that they want to make an offer of $650,000 on a million dollar listing.  Call me zany…but me-thinks it’s a waste of time. Oh, and that story in “Date Night”? That reduction would amount to over 80%. Folks…that was a joke. It’s a movie…they were joking. You see, it’s a comedy and they joke like that.

It’s not that I’m saying the market doesn’t decline…of course it does. It’s just simply that courageous buyers who take a shot are the ones that make the market decline. One small detail…they’re not getting 40% discounts either. The buyer’s that wait, strategically, and re-enter the market place at exactly the right time (the literal bottom) and scoop all other competitors…simply don’t exist. Unless, of course, they’re characters in a romantic comedy.

I think it’s the buyers that write offers when they have no competition, under asking that get the best deals. It happened after 9/11/2001, it happened in the 4th quarter of 2008 and in most of 2009. Those folks bought when others didn’t. It’s that simple.

Comments

  1. Well written analysis. In hindsight, I am one of them – bought in may 2009. Didnt plan it, but I liked the situation where in no competition and better terms of negotiation and loan availability of course need to put down 20%.
    Unfortunately, most buyers are greedy. One thing I really noticed is: No one wants to put down 20% or even 10% down, especially the one that is waiting strategically. My colleague is just blaming the govt to keeping lower int rate. I am really getting tired of his rant and he does not want to put down 20% down at all. He wants the home to be around 300-400k in bay area.

  2. Too many ‘buyers’ are unrealistic in as far as what they think they can get. And well, many real estate agents are actually perpetuating the cycle by feeding them outdated information (‘hey this home is only 60% of what they overpaid in 2005’). Good stuff, Jim. I’m actually renting ‘Date Night’ tonight.

  3. Robert Amato says:

    Good post Jim. And a pretty good movie. It satirized the typical marriage that has gotten comfortable and complacent.

  4. Chris Canfield says:

    “It’s funny because I had a guy I worked with, temporarily, about 5 years ago who told me roughly the same goal.”

    And I think I worked with this guy [temporarily] three years ago. I ran into him again three months ago when he wanted to work with me again because I was the best Realtor he had worked with. He’s still renting. I respectfully declined

  5. Frances Rokicki says:

    You know that a really good sale, brings out the best and the worst of us. Some people will always be shoppers and most people will hunt down a good buy and grab it, immediately! I’ve had a few shoppers, come and go. They can be pretend buyers or pretend sellers. Weeding them out and deleting them, is the best thing that we can do for our business. Stick with the hunters who grab the deal!

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