How Soon We Forget

I hear a lot of Pleasanton, Dublin, and San Ramon buyers say they want to wait for “the bottom”. They just are not comfortable buying in the current market with all of the negativity and the fear of more price erosion. Perhaps it’s time to take a walk down memory lane and revisit the market of 2005. Because once we are past “the bottom”, and all signals are pointing up, we could be right back into that kind of market. You do remember the market in 2005, don’t you? (cue up background music with heavy strings)

Ah yes, the good old days. No worries about how much prices are going to drop. Everyone is buying real estate (even, as it turns out, some people who shouldn’t be). The news media is full of stories about how much homes are appreciating. You are my client, and you would like to buy a 4 bedroom, 2000 sq ft house in Pleasanton. You would like to spend between $800,000 and $900,000. Great! Let’s get started.

Thursday, 2:00 PM. There are 4 listings on the market that you can choose from. One of them backs up to the freeway, and it is overpriced by at least $50,000. Another one is completely original, and has dark brown chocolate carpeting, harvest gold appliances, and foil wallpaper everywhere. It kind of looks like Janis Joplin’s house would look in 1967. In fact, by the looks of the seller, they have been smoking a lot of what Janis smoked in the day (allegedly). The third house is moderately updated, but on a semi-busy street. You could live with it, but it is not perfect. It would be a good “backup” house. And the fourth house is remodeled throughout, great lot, and a definite showcase. After seeing the 4 houses, you decide to focus in on the 3rd and 4th choices. Smart move.

Thursday 4:30 PM. I call the agent on the “showcase” house. They are asking $869,000. However, they are not looking at offers until next Weds, which means we have to wait through the weekend. There will be competition. No matter, you want to go for it. It is a great house, and you can move right in. The 3rd house might be a good back up house if we are not able to get one we really want. I talk to the agent on the “backup” house, no offers yet, but several interested prospects. Good… no offers yet.

Friday, noon. No new listings on the market. Bummer

Saturday, 2:00 PM. Get a phone call from you. You drove by the “showcase” house, and there is an open house. You go in, and there is a constant stream of people filtering through the house. Everyone loves it, lots of questions directed at the agent, including “when are you looking at offers?” We will have company. No new listings on the market.

Sunday, 2:00 PM. Get another phone call from you. You drove by the “showcase” house, and it is of course open again. Almost a traffic jam on the street. People are going into the house in droves… like they are holding auditions for American Idol inside. Agent says “several people”" are interested. Nothing new on the market. You are anxious. I am thinking about taking up yoga.

Monday, 11:00 AM. I call the listing agent on the “showcase” house. Expects 6 to 10 offers based on what other agents have told him. Called the agent on the “backup house”. Two offers have been written, and the seller is reviewing them Monday night at 8:00.

Monday 4:00 PM. Decision point. Do you want to make an offer on the “backup ” house, or wait for the “showcase” house that will likely be a bidding war? You have to decide.

Monday 4:30 PM. 2 new listings hit the market. One is on a busy street. Forget it. The other one has some remodeling, looks promising. You drop everything and meet me at the house. Yes, there is some remodeling, but it backs up to apartments, and the pool is a disaster (looks like something the Creature of the Black Lagoon crawled out of in the 60’s). Oh yeah, it is $839,000. You decide to wait for the “showcase” house. You are going to pass on the “backup” house too. After all, there will be other listings, right?

Tuesday 10:30 AM. Find out the “backup” house had 2 offers on it, and sold for $20,000 over asking price. That’s okay, it is not the one you wanted. I take a couple of Rolaids. No new listings.

Wednesday 3:00 PM. Decision time. You and your wife are going by Macy’s home store to look at all the cool furniture you can put in your new home. Call the agent on the “showcase” house. She expects between 8 and 10 offers. More Rolaids. Undeterred, we make plans to meet a 5:00 to write an offer.

Wednesday 4:15 PM. New listing hits the market. It looks pretty good from the MLS information, not as good as the “showcase” house, but a possibility. No showings until Friday, so no chance of getting into it. Oh well.

Wednesday 4:50 PM. Call the agent again. 4 offers in hand, several more on the way. I ask her if she can give me a hint as to how high they are, and of course my question is met with laughter on the other end of the line. Oh well, worth a try. A couple more Rolaids.

Wednesday 5:00 PM. We meet to draft the offer. You are a strong buyer. 30% down, pre-approved, cash in the bank, etc. But there is competition. You talk about how the house would be perfect for you. I try my best to temper your enthusiasm, and remind you that there is a good chance you might not get the house. You are not phased by that thought.

Okay, run the comps. The last couple of closed sales say it should be priced at around $850,000. There are 2 pending sales that are kind of similar, and they were asking $855,000 and $870,000. It seems to be priced pretty well given the market conditions.

What do you want to offer? You respond with $860,000. Reality check time. There are already 4 offers, and probably 8 to 10 offers by the time they are presented. I calmly explain that you have a better chance of finding D B Cooper than getting the house for $860,000. Okay, but we are getting up there in terms of what you are able to afford. No argument from me. After much discussion, we decide to go in at $890,000. We will give it our best shot. Of course, this offering price has no relationship to comparable sales, or market data. At this point is is purely us against the other buyers, and who wants it the most. We have to strengthen the offer too. 7 day contingency period for the loan, appraisal (oh yeah, remember the appraisal?), and the inspection contingency. Stress level goes up. I try to remember what I did with my box of Zantac.

I have you write a cute letter to the seller telling them how much you love the house, how it will be perfect for you and your family, how you can see your kids playing in their yard, and how much you hope they choose your offer. You include a picture of your family and your dog. You include a copy of your Eagle Scout certificate.

We finish signing the offer, write the substantial deposit check, and I tell you to keep your fingers crossed as you leave the office. I also tell you not to get too attached to the house, because you might not get it. I call the agent, now 7 offers in hand, and 2 or 3 more expected. I have to get the agent the offer by 7:00 PM.

Wednesday 6:50 PM. I deliver the offer. Now I get to wait. And wait.

Wednesday 7:00 PM. Nothing

Wednesday 7:30 PM. Nothing

Wednesday 8:00 PM. Nothing. I start getting nervous.

Wednesday 8:30 PM. Call from the listing agent. They ended up with 12 offers. They are going to counter 6 of them, including ours. Multiple counter offer. Great. Expires at 10:00 AM the next morning. We have to jump through hoops, and we still may not get the house. I call you, and you sound drained but still hopeful. I am thinking about how cool it would be to have a normal job.

Wednesday 8:55 PM. I get the multiple counter offer faxed to me. $925,000. Yikes! I call you, and you are not enthused. You really wanted to stay under $900,000. But you can stretch and make it work. Let’s sleep on it.

Thursday 9:15 AM. We decide to up the ante. We counter back at $930,000. I’m feeling good about this. I deliver the counter to the agent.

Thursday 10:00 AM. No word from the agent

Thursday 10:30 AM. No word from the agent

Thursday 11:00 AM. Voicemail from the listing agent. “Thank you so much for the response (I already know we are screwed by that opening sentence) but the seller has chosen one of the other offers. It was a little higher than yours, with no loan or appraisal contingency. We’ll let you know if anything happens to the escrow”.

Thursday 11:01 AM. Bolt to Starbucks. Need a Carmel Frap. Now! 2 more Rolaids en route. I wonder what it would be like to sell for a software company. Surely it would be easier.

Thursday 11:08 AM. I call you. You are bummed. I can hear the combination of disappointment and exasperation in your voice. We did everything we could, but it was not enough. That’s okay, I reassure you. There will be other houses. It wasn’t meant to be. (funny how Realtors become such great philosophers at times like this). I’m anxious. I know we have to go through this circus again.

We end up writing offers on 4 more houses. We finally get one. Evey new listing seems to be priced $10,000 or $20,000 higher. With every house we loose, we get more aggressive on the next one. We waive loan contingencies. We shorten inspection contingencies. We throw in 30 days free rent, and dinner at Ruth’s Criss. The house is not perfect, not even close. But after the ups and downs of 5 offer presentations, you are relieved to finally have one in contract. Of course, there were several issues that came out in the inspections, and of course the seller is unwilling to fix any of them. But hey, at least we got the house. For $45,00 over the asking price, and probably $55,000 over the comps. I worry about how long this crazy market can keep up. At some point, this market is going to run out of steam I think to myself. I’ve seen it before.

So, the question is, do you really want to wait for the market to be “better”? Really?