Crazy Talk – Real Estate Gone Mad

photo credit: respres

Oh Man, It’s True…

It’s finally happened. The world has gone mad, and I’ve got two choices. I can either fight it, or I can slip into that stylish straight jacket along with everyone else and accept it.

First, there are my clients, the ones who used to be normal until they started watching the news — and listening to the stories of their friends.  “Our next door neighbor’s Uncle Sol’s poker buddy just bought a foreclosure that was listed at $14 million dollars, and he got it for $7.95 and a goat!” they say. It’s then that they decide that they want one of those, and it becomes my job to find it.

So we spend every day on the phone discussing the new listings. I warn my buyers, the ones who want a turn-key home with all of the amenities of the White House Red Room, that the latest listing is a “light fixer.” “The toilets and cabinets have been removed,” I counsel. “Let’s see it!” they cry. “For the right price, we can do some touch-up painting!”  “But it has NO ROOF!” I shriek.  And, so, off we go to what will be our 98^th showing of the week, a showing which will culminate in my clients shaking their heads in disgust at this home that just needs too much work.

Kickin’ it Into Overdrive

Occasionally we hit pay dirt, and on the rare occasion that our new “home of choice” doesn’t already have twenty-seven to the power of infinity offers, all above asking price, my clients kick it into overdrive. We study the comps; we consider the cost of repairs which will need to be done to make the home sort-of habitable, and then my clients instruct me to write an offer at a “fair price.” This “fair price” is typically determined by adding the ages of their children and then dividing by the number of homes we have seen year-to-date, multiplying by the price of crude oil in Danish kroner, and then subtracting a random integer (usually 3). And the owner rejects it. Rinse and repeat.

Now, before you argue that to be a doormat I have to lay down, let me point out that these are often past clients I am working with. I do not, practically speaking, have the luxury of firing them. They stuck with me in the good days, and I feel a fiduciary obligation to stick with them in the crazy days.

It’s Not All THEIR Fault…

I can’t blame the clients entirely. Agents today deserve some of the credit for the cloud of insanity under which we are operating. Let’s take that “asking price.” Particularly where short-sales and foreclosures are concerned, the asking price today is most frequently not based on perceived market values or an analysis of comparable sales and trends, but it is some mythical number intended to move that sucker as quickly as possible. We saw one of those homes make its debut in our area this week. It had eleven – eleven – offers in two days. It is times like this when I have to ask whose interests are being served (Answer: the bank’s), and I have to wonder if the agents are just firing into a crowded room (yes). And, so go the distress sales, go the rest. What we are now witnessing in many areas is a downward spiral, a spiral fueled by agents who are perhaps a little too opportunistic. They may be a little too quick to facilitate a short sale (heck, it’s a listing!) just because the net sheet is upside down, forgetting that the seller should be counseled on other options. And they may be a little quick to price that puppy to fly off the shelf, at any price, forgetting that even their clients in a short position would be better off registering a lesser loss.

Oh, and Don’t Forget the Banks

Finally, there are the banks. Not them again! The banks, one could argue, largely got us into this mess, and they are the gift that keeps on giving. While they are now busy mitigating their losses, the sellers who didn’t fall into the over-leveraging trap are watching their home’s equity and their chances of selling before the next time Thanksgiving falls on a Tuesday mitigated into oblivion. The lenders, having reclaimed their collateral, assign a single agent a hundred listings or more, homes spread across entire counties, when a single agent clearly cannot cover that much geography while wearing the hat of the neighborhood expert. They miss on the pricing – a lot – but there is no accountability, because the bank-owner just wants it gone, and there is no motivation on the part of the agent to do anything other than slap a crazy price on it, because the agent just wants it sold. Sure, the banks dispatch other agents to offer an independent Broker Price Opinion, but these agents too are stretched a little thin. Or, perhaps, the lenders just don’t care. They are clearing the books of the bad paper, but the problem is this “bad paper,” paper manufactured from greed, paper which used to represent families, is now being used to TP our neighborhoods.

These are crazy times we are living in. Unfortunately, I fear my stay in the asylum is going to last awhile longer. Pass the meds.