Whats In It For Me?

With every shift in market dynamics, a new mentality seems to emerge from buyers and sellers. When the market was surging two years ago, sellers would say "Lets list it for $20,000 more than its worth and if we wait a while, somebody will pay that much." If they listed the property in 2006 they might have been right. If it was in 2007 they were dead wrong. Now that the market has clearly fallen into the buyer's favor I hear buyers say "Lets low-ball them at half of what they are asking...heck we ain't got nothin' to lose".

I think both of these comments reflect a fundamental misunderstanding of the realities of how our real estate market functions. Hence, today's chart:



This is your basic supply and demand chart. However it really shows the dynamics of what is going on. When negotiating real estate, its important to go into a negotiation or "offer" with the most amount of knowledge possible. We need to probe what IS possible in a given scenario.

From a sellers standpoint we need to know if a buyer can afford to purchase the home. Do they make enough money? Are buyers as a whole making more money? Do lender require larger down payments? How much money does the buyer have available for earnest money? These are very important factors to know when determining how to price a property and also what to demand of a buyer in order to conclude a transaction.

From a buyers standpoint we need to know just as much. What does the seller owe on the property? Could they (or would they) come to the closing table with cash of my offer is less than what they owe? How motivated is the seller? Do they want to sell or do they HAVE to sell? What are the circumstances?

I think the chart above explains the dynamics pretty clearly. I make it my goal to educate each of my clients so that we spend much more time in The Sweet Spot than we do wandering around in Fantasy Land.