I received an insightful, amusing and analytically-correct email this week from a colleague in Southern California, where there's a rush for lower-end foreclosures that rivals what's been going on here in Colorado for the past six months.
And, like here, agents in other parts of the country are having a hard time helping their clients reconcile reality with what they hear in the media, from well-meaning friends and co-workers or "Uncle Vinny in New Jersey", who (allegedly) just bought a $900,000 home for $27 at an auction.
THE FIVE STAGES OF BUYERS' GRIEF (2009 version):
Denial - Buyers are adamant about not overpaying.
“The only house I’m buying is the one I can steal from the bank” is a common theme. Buyers read daily about how bad the economy is, how bad the real estate market is, and figure this might be a good opportunity. They begin their search.
Anger - As buyers beginning searching the Internet, they wonder where all the inventory went.
They surf the web in search of that steal, thinking that there will be plenty laying around. How hard can it be to find a deal? But then they realize that a cursory overview of the inventory produces junkers and over-priced turkeys. Anger begins to set in when they realize it isn’t going to be as easy as they thought.
Bargaining - Early on every buyer wants to make low offers - we’re stealing one, right?
But the good listings always seems to have competing offers, with 95% of the buyers chasing 5-10% of the inventory. The theory goes that the ones buying these homes are simply further along in the five stages of buyers’ grief - and they outbid you. Many buyers will lose out on 1-3 offers before succeeding.
Depression - It’s hard enough just to find a good deal, to then lose out on one or more is depressing.
Many give up for a while, deciding that it’s not meant to be, they’ll wait until the market comes down more, wait until the economy gets worse, banks unleash the shadow inventory, etc. But there’s a haunting feeling that it won’t get easier.
Acceptance - Buyers loosen up on their demand to steal one, and shift to acquisition mode.
By now most just want to get it over with, and accept that the successful search and purchase of a home is more time and energy-consuming than they thought. The next time they find a home that suits their needs, they step up a little sooner, reach a little higher than everyone else, and finally land one. They can handle the payment, there's still equity in the deal, and yes, you can file an amended tax return to get that $8,000 now!
Today’s buyers don’t like these feelings, and many will wait it out, hoping it’ll get easier, later. But with the government backstopping the markets, historic low interest rates, a fat tax credit for first-time buyers and banks being very deliberate about processing their short sales and REOs, it could be a long wait.
