HESITATION

First, some perspective. 

The Denver housing market is still terrific, as strong as any in the nation.  In fact, on a scale of 1 to 10, we have been in the 9 to 10 range for overall strength and fundamentals for nearly three years.

Denver and San Francisco have been running neck and neck during 2015 as the top-performing housing markets in the country.  And what do we have in common?  Young, educated, highly employable workers and jobs for anybody who wants to work.

None of that has changed.

But there has been a change in the past 60-90 days, and it’s time to start exercising just a bit of caution. 

I often tell people that the last place you want to go for real estate news is the Denver Post, because there is no real reporting there.  The Post is good for reporting headlines from press releases put together by Zillow and Trulia.  The Post is good at talking to the same five high profile Cherry Creek / Wash Park / Highlands-based agents who talk about their million dollar clients and the hottest new restaurants in town. 

But the heartbeat of the market is found in much grittier places, on the street and closer to where most people live.  The best way to gauge a market is to list a working class neighborhood home for sale and then watch what happens.

And what’s happening now is different than what happened in April or May.  While the showings are still coming, the offers are not… at least not in the same numbers. 

For example, I recently listed an estate sale home priced $10,000 to $50,000 below other recent sales in the neighborhood due to its overall dated condition.  While it wasn’t being given away, it wasn’t priced near the top shelf, either. 

Showings?  No problem.  Thirty five of them in four days, consistent with all the craziness we have come to expect in 2015.  But the offers?  Not so much.

Ultimately, we ended up with just three offers… a cash buyer, more than $30k below list, and two conventionally-financed buyers with smaller down payments. 

But no over-the-moon offers, no escalators, and no one willing to waive the appraisal or let a portion of earnest money go hard upon acceptance. 

I guess we have gotten so used to crazy that when normal comes along, we barely recognize it. 

It is my belief that the frenzy we saw in the spring would have generated six to 10 offers on this home, but the late summer reality turned out to be something less.

I had a similar experience with a condo I listed downtown last month.  Priced right, turnkey condition, an easy sale.  And in one weekend, 14 showings… and just two offers. 

I do think you can use this anecdotal information to judge a change in the climate. 

Prices are high, the highest they have ever been.  Sellers are squeezing this market for all it’s worth, so value is very hard to find.  There is a lot of arrogance and greed driving things, and that type of market rarely sustains for long. 

As we move into fall, buyers are becoming a bit more selective, a bit more patient, and a bit more willing to say no to properties that don’t check all the boxes.

It’s very possible that a slowdown is taking shape, and you have to start being a little bit more careful… whether you are buying or selling.

The fundamentals of the market are still strong – watch the unemployment rate, because that will tell you the overall health of the market – but it’s not like it was three to six months ago.  And with the holidays coming, it’s likely to cool off further as the year winds to a close.

Homes are still selling, and buyers are still out there.  But you’re going to have to look at things differently in 2016, because we are moving back toward a market where selling a home actually requires work and buying a home will once again be contingent on comps and actual value, not simply emotion and greed.     

COST VS VALUE

Life is too short to be cheap.

Now I’m not in favor of mindlessly blowing money, far from it.  But I think a fundamental skill for anyone to develop is discerning the different between cost and value.

Cost is what you pay.  Value is what you get.

But for many people, the conversation begins and ends with cost.  Determining value requires higher level thinking, and some just can’t get there.

I recently went on a listing consultation and after the appointment, as I was walking to my car, an elderly lady called out to me from her front porch across the street.  “Sir, are you a real estate broker?”

We sat down and chatted, and as it turned out, she had been recently widowed.  She now wanted to sell her small starter home and move back to Nebraska to be closer to her kids.

I’ll skip the details, but over the next few days we had several conversations about what she needed to do to get the home ready, what the strategy would be for pricing and marketing it, and how we would approach things if we received multiple offers, which was likely at this entry-level price point.

Finally, the conversation turned to commissions.  “What do you charge?”, she said.

“Six percent”, I replied, “which is split between my brokerage and the brokerage that brings things the buyer.  I pay for staging and photography, plus I’ll handle all aspects of marketing, negotiations, and follow up.  I’ll get the word out to as many people as possible before we list, I’ll follow-up with everybody while we’re on the market, and I’ll do everything in my power to leverage the offers we get to help you end up with the most money possible when it’s all said and done.  It’s my job to make this simple, keep stress off of you and manage the entire process.”

She paused. 

“Six percent?”, she said.  “I know I can find someone who will list it for less.”   

And she can.  Absolutely.  And I can find a bottle of wine for $3.99, a hamburger for a dollar and we can pick some old French fries out of the trash can.  A well rounded meal for under $5.

In life, most of the time, you get what you pay for.

And when you focus on cost, you miss half of the equation. 

What if you pay $20,000 for a car that breaks down after 100,000 miles?  But what if you could pay $25,000 for a car that runs well for 200,000 miles?  Which actually costs more?

If you have 45 showings and seven offers on your house, can you screw that up? 

Those who focus on cost will simply go with the highest offer.  Those who focus on value will look at it differently.  Of these seven buyers, who is actually likely to close on the deal?  Who is qualified and who is not?  Who is motivated and who is not?  Who has a problem-solving agent and who has a hot-tempered screamer representing them?

Who will take the time to vet each offer?  To call the lender?  To Google search the buyers.  To profile the agent?  To talk about potential challenges up front, so we can address future sticking points before signatures have locked us into a binding agreement?

I am a huge believer that most of what exists in our lives is stuff we attracted.  Want to be cheap?  Get ready to hang out with cheap people.  Want to be greedy?  Welcome to a lifetime of tug of war.  Want to be dishonest?  Get ready to be lied to.

People who focus on value know that the true measure of value isn’t the size of the seed, but rather the size of the tree that comes from it. 

Can two agents list the same home, but one agent gets $290k while another can get $300k?  Absolutely.  It’s called marketing, strategy and negotiation. 

Who’s smarter?  Seller A, who pays a 5% commission and gets $290k?  Or Seller B, who pays a 6% commission and gets $300k.  One focused on cost, the other on value.

In my worldview, cost is secondary to value.  I strive to surround myself with problem-solving people who spend their time building relationships and networks.  I spend time with people who are honest, reliable, hard-working and committed.  I look for people who invest in other people and who are willing to do the right thing, whose ethics are unwavering and non-situational.  I look for connectors, not takers.

If you find and build a network of people like that, you’re going to win. 

In the end, it doesn’t matter if you pay 5%, 6% or 10% to someone to sell your home.  The only thing that matters is what you walk away with at the end of the day.  And how you feel about the process.

This lesson goes so far beyond real estate, because it’s also how life works.  Be careful about what (and who) you invite into your life, because chances are whatever you make room for will eventually fill that space.

Whether it’s good or bad.