Posted by HankM on May 16, 1999 at 09:28:03:
nt
Motivated Sellers, A Thing of the Past - Posted by Jimbob
Posted by Jimbob on May 14, 1999 at 11:00:05:
Think it’s going to be easy to scoop up the bargains? Think again, check out this article!
Housing crunch slamming doors on buyers
By Haya El Nasser, USA TODAY
Homebuyers in cities from Seattle to Boston are caught in one of the most cutthroat markets in years because there aren’t enough homes for sale in desirable neighborhoods and suburbs.
Buyers are experiencing vicious bidding wars, often paying thousands of dollars above asking prices. Some are making offers sight unseen. Others are offering “escalator” clauses to knock other buyers out of the running: They put a price in their purchase offer but add a clause saying they’ll pay $1,000 more than any higher offer.
In the affluent Georgetown neighborhood of Washington, D.C., housing is so scarce that buyers are on the lookout for houses owned by the elderly. When they find them, they contact the owners’ relatives to ask whether they can have first dibs when the owners die.
Open houses in Boston are “like the lines at Disneyworld,” says Cynthia Harkness, who has been shopping with her husband for a bigger home. At one house, they counted 80 cards from real estate agents. She lost two houses while on a business trip.
A strong economy and low interest rates are driving more people to buy homes almost everywhere. But there aren’t enough homes for sale in the most-desired areas: fashionable city neighborhoods and the first ring of suburbs. These areas offer shorter commutes, public transportation and
easy access to entertainment and restaurants. But they’re so developed that there’s no land for new subdivisions.
“Oh, the poor buyers,” says Julie Hummel, a co-owner of The Kentwood Company at Cherry Creek in Denver, where the number of homes for sale in the six-county metropolitan area is 30% lower than a year ago. “It’s horrible for them.”
The frenzy is scaring off people who might want to sell their homes. They’re afraid to sell and get caught in the same nightmare when they look for a home, which is only adding to the squeeze.
In the end, many buyers end up offering a lot of money for homes that they don’t even like that much.
“I thought it would be enough to have access to half a million dollars, but it’s not,” says Harkness, 39. “You have to have the money, but you have to have the vision to look beyond the chips in the ceiling and the fireplace that is falling down and the driveway that needs finishing. It has been a rude awakening.”
With a baby on the way, she and her husband, Harry, a software engineer, decided to move from their condominium on Boston’s waterfront and buy a house in a nearby suburb. They have high-paying jobs. They have good equity from their condo. And they have a letter from the bank guaranteeing
a mortgage. They thought they were set.
But they have found nothing since they started their home-buying odyssey early this year. New homes are practically nonexistent in areas they want to live in: towns like Winchester and Medford, two older Boston suburbs with graceful Victorian homes, good schools and access to commuter rails.
No room to build
Besides more buyers than sellers, part of the problem in prime, older suburbs is there’s no room to build. Homes are snatched up in days despite flaws that would make them undesirable in a less-frantic market.
Realtors are soliciting business with mass mailings to homeowners and wooing potential sellers with gifts or even discounts on their commissions - anything to get a house on the market. They’re urging their buyers to move fast because many homes sell before they’re officially listed. Sellers
expecting multiple bids in effect set up an auction. They demand a deposit and sealed bid from each buyer within 24 hours of putting their house up for sale.
The National Association of Realtors says these horror stories are limited to areas that are experiencing the fastest job growth and have no room to grow. Las Vegas, for example, doesn’t have a problem even though it’s one of the fastest-growing cities in the country. About 6,500 people move to the city every month and only about 2,100 leave. But there’s plenty of land, and homes are getting built around the clock, says Marv Rubin of RE/MAX Achievers.
Nationally, the number of homes for sale has dipped only slightly the past year. There were 2.3 million homes on the market in March vs. 2.5 million in March 1998, according to the group’s most recent statistics.
Here’s what’s happening in some of the hottest real estate markets around the country:
In pricey bedroom communities of New York, where Wall Street’s amazing ride has created countless millionaires, buyers are paying close to $1 million for houses built almost 50 years ago. They’re tearing them down and building new ones. It’s the only way to make space.
In Greenwich, Conn., for example, only 2,000 acres are left to build on, says Nancy Healy of the Greenwich Association of Realtors. “That’s not much space when you consider that Greenwich is 50 square miles.”
In Newtown, a city of about 23,000 a few miles east of Danbury, Conn., there is “a critical shortage” of homes in the $200,000-$400,000 range, says Kathi Weller, president of the 115-member Newtown Board of Realtors. She has been working four months to find a house that costs no more than $260,000 for a couple. They have looked in four towns, found
one house they could bid on and lost.
In the Northwest, growth boundaries around Seattle and Portland, Ore.,popular weapons in the fight against suburban sprawl, have created a tight housing market.
In Seattle, the average price of homes sold the first four months of the year was 22% higher than the same period last year. In prime neighborhoods like Queen Anne Hill and Magnolia, the average was up 30%, from $312,551 to $407,708.
Agents at John L. Scott Real Estate, one of the Northwest’s largest real estate companies, take photographs of houses that go on the market, put them on the Internet immediately and e-mail buyers before the houses go into the multiple listing books used by all agents.
In the Washington, D.C., area, where the telecommunications revolution has created a hot economy of Internet, satellite and other information-technology companies, there is a shortage of single-family homes. “People want a single-family, free-standing home,” says Nathan Booth, chairman of the board of the Northern Virginia Association of Realtors. “We don’t have the land. What you see are townhomes.”
The number of single-family homes listed for sale in the Washington area in March was about 30% lower than a year before. Suburbs such as Arlington, Va., and Bethesda, Md., which border the city, are in demand because more buyers want to avoid the area’s grueling commutes, Booth says.
In the district itself, a $5,000 tax credit for first-time homebuyers has helped fuel demand. The number of homes for sale shrank from 3,139 in March last year to 2,161 this year.
In Denver, where unemployment is about 2%, there is a shortage of construction workers. “And the price of labor is out of sight,” says Hummel, the Denver real estate broker.
She is stunned by the madness of the housing market. In Washington Park, a prime city neighborhood with good schools and a beautiful park,Hummel sold a two-bedroom, square-foot house five years ago for $210,000. It was a record price at the time. The house sold last month for $359,000. There were four competing offers within days of the house going on the market.
Giving prayer a try
There’s a little bit of relief in sight in cities like Denver and Chicago, where developers are building housing on vacant city lots and tearing down warehouses to build lofts, row houses and single-family homes. In Denver, the closing of Lowry Air Force Base has opened much-needed land in the
city, and new single-family homes and condominiums will soon be available.
But for buyers, there’s little room to negotiate on these new properties. At the old Lowry base, buyers are already competing to get on a reservation list.
Jane Richlovsky and Jan Munger have some advice for frustrated buyers: Keep the faith. When the two women offered $156,500 for a house in Seattle’s Central District, an inner-city neighborhood, they were sure they would not get it.
“We started lighting candles to St. Jude, the patron saint of lost causes,” says Richlovsky, a 33-year-old artist and model.
“We went through eight candles, and (the seller) accepted our offer.”
Re: Motivated Sellers, A Thing of the Past - Posted by Matthew Chan
Posted by Matthew Chan on May 15, 1999 at 16:59:40:
I am worried now. I guess I better get out while the getting is good since a newspaper reporter who ISN’T in the CRE business is interviewing people who know even less about RE, all trying to buy the expensive “pretty houses” (quoted from Legrand).
Here they come spinning out of the turn … - Posted by HankM
Posted by HankM on May 15, 1999 at 13:34:15:
The race is neck and neck and it’s down to the finish line … but wait, there’s only one horse on the track! Guess he wins:) … that would be me.
Re: “An example” down below
Get to the property and guess what, the tenant that “moved out the first of the month” is still there and isn’t in a very good mood; Vic the seller is squiming a little. I like this, a tenant problem on top of a fixer. She wants to call the police instead of showing the property … we get past that and I get a quick tour. But enough to see that it’s ugly and needs some work, but really isn’t too too bad; course Vic thinks different and that’s just fine with me.
We talk for a while and I find out that the tenant hasn’t been paying for a while which is why he didn’t renew the lease … he owns the place free and clear and actually is quite well off he would just like to get rid of his problem.
So I lay it out for him, I named the low end of market number for the area and said that that was for a well kept house. He starts in, “but this isn’t in good shape, in fact it looks like it needs about 25000 worth of work, plus a garage” I about fell over, it needs about 15K INCLUDING THE GARAGE:). So I added that because of the condition a regular loan probably wouldn’t be possible and how did he feel about holding a mortgage. He said I’ve never done that, but I see your point. A smart guy.
So I made my pitch … “how about I give you 12K to close, which is more than you’ve got in rent the last year and I pay you the rest in 5 years, a total of 85K?” … to make a long story short, we ended at 15K at close on 90K purchase for two years. Signed it up on the hood of my car.
No payments, no interest and a 165K retail value after about 15k of work. All this in 41 day average list market that gets bid up …
Hank
Oh yeah, the earnest money thing that someone will ask about … I said, “how about I take care of the eviction for you?” He said “You’d do that?”, I said, “Call it good faith”.
Re: Motivated Sellers, A Thing of the Past - Posted by Irwin
Posted by Irwin on May 14, 1999 at 19:57:06:
All I can say is, this writer ought to visit the mid-west. There sure ain’t no mass buying frenzy around here. I have several suburban beauties in subdivisions and can’t get the time of day from buyers. They’re priced right too, with seller financing too, listed in MLS too. The problem seems to be too much selling competition both from builders and owners. The buyers are picky, picky picky. If it needs a good vacuuming and maybe some touch up paint, it needs too much work. On to the next eight, ten or twenty in the area that are for sale. Interesting isn’t it? This writer sees a runaway seller’s market, and from where I sit, I see a housing market thats about to implode. We can’t both be right, can we?
They are right under your nose - Posted by Jackie in Dallas
Posted by Jackie in Dallas on May 14, 1999 at 19:43:57:
Have you ever driven through a neighborhood and NOT found any “houses” that looked motivated - you know the look, tall grass, Pizza Hut fliers all over the porch…
But then driven through that same neighborhood a month or two later and find 2 VACANT houses with tall grass, broken windows, and trash all over the porch!
You see, the first time you drove through that neighborhood, those homeowners in the now vacant houses were VERY motivated - in fact, they were desperate…but they just didn’t know what to do.
They didn’t know there was anyone that could help them out of their problem.
The motivated seller was right there - and they are all over town (just look at the foreclosure list and bankruptcy list) - but they DON’T KNOW THAT YOU CAN HELP THEM.
So the solution is to find as many different ways as you can to let the motivated sellers know you have solutions to their problems.
Back to the neighborhood above - what would have happened if while you drove through the first time you pulled the car over placed a few signs that say “We Buy Houses” at the entrance and exits to the neighborhood?
What would have happened if you had a few hundred fliers printed and put one on every door - making sure you stopped to visit with any neighbors that were outside and told them that you were looking for houses to buy in the neighborhood?
What if you even offered $100 or $500 referral fees ?
Chances are the motivated sellers would come out of hiding because YOU made yourself available and you would have at least 2 GREAT deals my now.
They ARE out there - but they don’t know that YOU are out there!
Re: Motivated Sellers, A Thing of the Past - Posted by Mike Oldfield
Posted by Mike Oldfield on May 14, 1999 at 18:23:59:
This is the most ridiculous thing I have ever heard.
You need to develope 2 skills FAST
-
How to find motivated sellers right under your nose in any market which is a straight forward predictable routine which you obviosuly have missed
-
How to avoid a lousy defeatist attitude at all cost so the rest of your life doesnt pass by with nothing to show for it.
Otherwise, you dont belong here, and will be attacked by legions of investors who dont have time to pity you
Snap out of it brother. Youd be depressing if any one was listening. You either lost your faith in this BIZ or you never had it. If you want to be mediocre thats fine with me. If you dont, then listen up.
You have bigem assem problemins
Dont get me wrong, Im glad there are lots of people like you out there. It assures me that there are more opportunties for me.
I love real estate and you should too,
Mike Oldfield
P.S. Your post is the longest I have ever read on this site. If you need that many words to tell us why what we do every single day with great success in all kinds of markets wont work. Maybe, just maybe you are mistaken. You pay my expenses and I will show where the goods are hidden in your town city state or country. I think Zig Ziglar calls yours STINKIN THINKIN. And yes misery loves comaony but your out of luck here. Theres no misery here to share. You are at the wrong site. Did you know there is a site called www.lifessucks.com. Maybe you should go there. They might listen like we dont
MOON POWER…that’s the ticket - Posted by Bill Gatten
Posted by Bill Gatten on May 14, 1999 at 15:01:19:
Jimbob,
Thanks for the article. It’s great. Here’s my take on it all (sigh…a little like Piper’s though I’m afraid–I haven’t had a unique or original thought since I met that guy here on CRE):
Never forget that “energy” itself goes both ways.
During daylight hours we can get energy from the Sun (solar energy). Everyone understands that?but what do we do at night? Mention “lunar energy” and people laugh. “You crazy? The moon doesn’t give off enough light to do that,” they’ll insist. But, nonetheless, in a power plant on the northern coast of Hawaii, when the Sun shuts off and the solar energy boys go home, some lunar energy types hop out of bed and start creating Moon Power. You see, this latter group isn’t concerned with light and heat. They’ve figured out that the Moon lifts the ocean’s surface up every night with a pretty consistent and powerful “yank” and when the water is lowered back down, it’s heavy enough too exert a pretty good pull on anything attached to it. So these guys, see, anchored a long cable to the ocean floor, and placed the other end through a pulley on a large floating platform above?so that when the tide comes in the pulley is turned with some considerable rotary force: thereby generating tremendous amounts of energy (from the Moon). OK, well?it doesn’t work precisely that way, but you get the picture.
How it relates to CRE investing:
Here in California in the late 80’s, my company (then it was banking, equipment leasing, lending and Real Estate) was heavily into the Equity Share Business, and saw the phenomena your article describes–up real close. Equity Sharing in the late 80’s was lucrative for lots of folks. Buyers by the scads and score were willing to do anything we wanted them to (e.g., like hand us money). It was truly a Seller’s Market that was destined to last forever (call it the “Solar energy” of our analogy here). For every one of those willing buyers, we knew there was a unique seller out there somewhere… and all we had to do was find that rascal and wedge ourselves between them and the property and wait for the cash to begin dripping out.
But, alas, in November of 1989 the shish kabob hit the fan dancer, and the “Lunar cycle” was upon us. The plethora of buyers stopped buying, as those few newly inconvenienced willing sellers stopped selling and started screaming, and the RE market flip-flopped (i.e., went… to Sally’s house for a nap, as it were).
Did we suffer? No! When the smoke cleared and all the other Equity Share companies dried up, went broke and blew away due the shortage of willing buyers, we went crazy with the new found abundance of willing sellers. For every one of those willing sellers, we knew there was a unique buyer out there somewhere (a pony in the horse poo pile, as it were) … and all we had to do was find that rascal and wedge ourselves between them and the property and wait for the cash to begin dripping out.
Think of it? Is it really any more difficult to find a willing CRE seller in a seller’s market that it is a willing CRE buyer in buyer’s market [*answer below].
*NO!!!
Bill
Wait! Wait! 'thought of another one… Do you have to change hand straps when the subway switches directions??? (Ok…so that would mean you missed your stop… but, hey, the solar lunar thing wasn’t bad, you have to admit)
Get a Real Job - Posted by Arie O
Posted by Arie O on May 14, 1999 at 13:28:38:
If you believe this this business is not for you. Get an 8 to 5. We will think of you kindly during my month off trips to Kauai. The Day there aren’t distressed properties with people who have to sell them we will be eating ice cream cones in Hell.
Arie O
Re: Motivated Sellers, A Thing of the Past - Posted by Rob FL
Posted by Rob FL on May 14, 1999 at 12:21:25:
I read in a book one time that there are two categories of properties you need to look for to get the best deals (1) properties that nobody wants and (2) properties that nobody knows are for sale.
The number 1 category are the properties that are run down, fire damaged, title problems. Most buyers and realtors run from these. Why? Banks won’t finance them or they are very difficult to close on.
The number 2 category is the tired landlords, for sale by owners, poor advertisers, no equity but need to sell, abandonned houses, etc. I have bought several rental properties that were never advertised for sale; not even a sign out front. The landlords contacted me because I sent them a letter. I even had one of them finance the deal for me. This category also includes the no equity properties. Realtors won’t touch them because there isn’t enough room for a commission. Thus they must go FSBO.
I could go on and on but I won’t. While everyone else says, “There are no deals left. It is a seller’s market.” Many people do find the deals. Do your research. Best wishes.
Re: Motivated Sellers, A Thing of the Past - Posted by JPiper
Posted by JPiper on May 14, 1999 at 11:48:13:
Gosh?.it’s amazing isn’t it? No more people who defaulted on their payment?.the bank foreclosed, no more tired landlords, no more out-of-state owners whose house got trashed, no more vacant or abandoned houses, no more owners with two mortgage payments, no more junk houses, no more divorces, deaths, bankruptcies. No more neighborhoods that are undesirable or less desirable. We MUST have reached a golden era. These are indeed exciting times.
How well I remember ALL the prior golden eras. In 1989 in California I well remember the interview on television with a Remax agent. BUY TODAY was the message?..they’re going up faster than you can SAVE a down payment. 500,000 new people coming in every year, the equivalent of a new city of people. The Japanese are buying everything. One Japanese buyer is driving around in his limo, stopping at houses and making all cash offers well above the market value?..he’s buying hundreds, no thousands of houses. Camp outs at the new home subdivisions. It was in EVERY newspaper, on EVERY TV station. No more land. Buy today, it will be higher next year.
As we read the newspapers, watched TV, perhaps we were witnessing the EXACT peak. Amazing how uncanny the news media is. They manage to publish this type of information at almost the exact time that we should have all been racing for the exit. At the peak only 10% or so of homeowners could even qualify for their own homes. By 1992 some of this was corrected. Prices were down perhaps 30-40% in some areas?..especially the nice, pricey ones. You couldn’t get a moving van out of Los Angeles?.there were waiting lines for moving vans. They drove them back into Los Angeles empty just to meet the huge demand of people wanting to leave. Deals unraveled all over town. The high flyers went bust. Record foreclosures. Lenders underwater and out of business. Lot’s of gnashing of teeth.
The real estate business is an interesting business. There’s either too many buyers, or too many sellers. Rarely have I seen much inbetween. It’s either hard to find properties, or it’s hard to find buyers. Well, I guess that why we make the big bucks?..dealing with what comes our way, finding markets to make money in. And one more thing?..remember the economic cycle?..it’s alive and well.
JPiper
Re: Motivated Sellers, A Thing of the Past - Posted by JohnK(CA)
Posted by JohnK(CA) on May 14, 1999 at 11:42:38:
You’re RIGHT, it can’t be done in this day and age…LOL.
If you think you can’t find a motivated seller, it’s almost sure you will not. If you believe you can, it’s almost certain you will.
Do as you will
JohnK(CA)
Jimbob, take it easy… - Posted by ScottE
Posted by ScottE on May 14, 1999 at 11:38:55:
Just because there don’t SEEM to be many lucrative buying opportunities in these exclusive areas doesn’t mean there aren’t good deals in adjoining areas.
Take it on yourself to search the outlying communities and beat people to the punch. Folks seem compelled to, in my opinion, waste there lives commuting to and from their big city jobs and have demonstrated that they are willing to sacrifice that time.
Good luck
Scott
It’s a regional market (nt) - Posted by Mark (SDCA)
Posted by Mark (SDCA) on May 17, 1999 at 13:13:15:
nt
Re: Motivated Sellers, A Thing of the Past - Posted by HankM
Posted by HankM on May 14, 1999 at 20:29:55:
Irwin,
I feel your pain. Really. I’ve got one in 2 suburbs over that just ain’t movin’ Seller financing, priced right, in good shape … two tried, couldn’t qualify.
Then again I’ve got the potential deal below … real hot market and still could get a great deal … less than 10 miles apart … geography is that specific. OK, you want particulars, the one that won’t sell had it’s police chief indicted, the number 2 resigned and is in witness protection and the general feeling is that those above are “in the know” … the one that is hot is home to “Frank Lloydd Wright”, "Earnest Hemmingway (even though he diss’d the place) and has a darn good school system …
As the adage goes, Location, Location, Location.
Best wishes.
Hank
Re: Get a Real Job - Posted by Jimbob
Posted by Jimbob on May 14, 1999 at 14:21:48:
I’ll be in Maui at the end of this month for two weeks, and it aint because I have a 9-5 job!
An example … - Posted by HankM
Posted by HankM on May 14, 1999 at 17:06:06:
For those who don’t follow along, understand that I dropped about 600 pieces to “Absentee” owners at the first of the month.
Got a call today and will see tomorrow a property that no one knows is for sale, is a tired landlord and “needs some work, in fact I haven’t been inside in some time; tenants been there 5 years” … guess who gets first shot at this one?
This is in a market that has an average listing time of 41 days and is in the bidding frenzy mentioned in the article.
So here is a deal that is a little of both of Rob’s points, a fixer (that not many want) and one that no one knows is for sale … will I get it? Don’t know, but I know I’ve got first (and only) shot so far; Place your bets!
Hank
Great Reply - Posted by Maurice (So. Ca.)
Posted by Maurice (So. Ca.) on May 14, 1999 at 13:58:20:
You said it!!
Re: Motivated Sellers, A Thing of the Past - Posted by Irwin
Posted by Irwin on May 15, 1999 at 06:03:15:
Oh Yeah! It is location etc… and sometimes it’s hard to figure. I’ve had some lower priced stuff go quickly because financing was the key. But the upper range stuff sits there. The One I have is a 3BR 2BA 1725 sq ft, six years old on a golf course in suburban area. Mint condition. Rented for $1,400 per. Comps are in $150s. Similar house next door is on market for $165k. My asking price is $149,900. Contract possible. The last two Sunday ads got zero, count 'em zero, calls. The problem might be that some new homes in the area are priced about the same as mine. They also pay the closing costs. Oh well, one thing I’ve learned is that
no matter what it is, or where it is, ALL real estate sells EVENTUALLY. My longest holding period ended yesterday. I bought that fixer upper in October, 1985. No lie. I guess the lesson to be learned is: Don’t buy houses in October.
I’m Rootin’ for Ya, Hank - Posted by J.P. Vaughan
Posted by J.P. Vaughan on May 14, 1999 at 19:02:30:
I follow along, and I’m rooting for you. Let us know
how it goes. Good Luck…
JP