Bureaucracy

The bane of modern day society.  Bureaucracy.

Throw common sense and logic out the window.  When you're mired in bureaucracy, there is little you can do.


So how does this pertain to real estate transactions?

First and foremost; real estate management companies are "the" poster child of bureaucracies.  Multi-dwelling condos and co-ops are almost always managed by one of these outside real estate management companies.  Among other things, they handle building expenses, collecting rents, common charges and/or maintenance fees, keep the books for the building and file paperwork with the city and other agencies.  They are also instrumental in the approval process for sales and rentals.  This sales/rental process is where the owner/seller/buyer/landlord/renter interacts with the management company directly.

Management companies generally do not share your concern for whether or not you have a roof over your head.  If you are missing page 37 of document XYZ, your purchase/rental application will most likely be put on hold and work stops.  If you're lucky, you're told of the problem.  It's just as likely that when you haven't heard back from them in two weeks and call for a status report that only then will you find out that it was shelved weeks ago.

Anecdotes like the one above are not exaggerations, nor are they uncommon.  Problems arise when clients refuse to accept that this can happen to them.  "After all, if I'm spending $2,000,000 on this condo they should understand that a $47 discrepancy on my credit report is not important!"    Well, yes you're right.  And no, you're wrong.  It's not common sense that rules the day, it's bureaucracy.  The person processing your paperwork is more than likely an overwhelmed minimum wage employee with absolutely no discretion whatsoever in interpreting the "Big Picture".  He or she has no concept or concern over "shades of gray".

So what is the answer?  The answer is to not put yourself in a situation (if possible) where your paperwork is incomplete or sloppily submitted.  Furthermore, you should allocate a sufficiently generous block of time (if possible) for the management company and/or board to review your paperwork.

This is classic example of why who you choose as your broker matters.  This is grunt work, but it's critical to the success of your transaction.  If your broker does the best job possible assembling your paperwork and couples it with polite, non-threatening communication with the management company, your chances of success will be greatly maximized.

Reach me at: michael.sussilleaux@gmail.com

"Full Ask"

Obtaining the full asking price, or "Full Ask", on a property is nice for the seller.  Psychologically it's "Winning" (Charlie Sheen pun intended)

But is it really wise to hold out for "Full Ask"?

Several years ago, when the real estate feeding frenzy was at it's peak, bidding wars were common and prices climbed every week.  Sellers puffed out their chests and bragged that they got $200,000 over asking price.  Interestingly, buyers also boasted that they "paid $200,000 over asking price, and I won!".  In some markets brokers even adopted the strategy of deliberately listing the property well below market value in anticipation of a bidding war driving it far beyond what it was theoretically worth.

This strategy often worked.  In that particular psychological climate buyer's fear of losing was so strong that they willingly overpaid just to keep their "competition" from winning.  Seemingly odd behavior, but a surprisingly "human" reaction.

Times have changed.  The market went through a dramatic swing when prices dropped drastically.  Interestingly, you would think that stressed-out buyers nervous about committing to paying such a huge premium to own property would jump at the chance to buy at a 20-30% discount, but no -- they did not.  They were scared and afraid.  Logically you may ask "Would you like to buy the exact same property that was priced at 'x dollars' six months ago for only 80% of 'x' now?" but the answer was almost always "No".

Where are we today?  It's neither a seller's nor a buyer's market.  Most properties are priced reasonably and most trades are reasonably close to asking price, but almost invariably there's some wiggle room.  You would be hard pressed to find someone today to pay full ask simply because they expect to negotiate.

As a seller you must consider this before you commit to an initial asking price.  If you think your apartment is worth $1,000,000 it would be far wiser to list it at $1,050,000 or $1,100,000 and negotiate with a buyer than to list it at one million and expect full ask.  The strategy may change over time, but that's the way it is now.

Summary: Markets change.  You must to adapt.to them accordingly.  Bucking the trend -- even if you think it makes sense -- is a recipe for failure.  You can still achieve the same goals, it's just the method that requires flexibility.

Reach me at: michael.sussilleaux@gmail.com

Winds of Change

The market is shifting again. You'll read about it in the papers several months from now when all the current sales close, and the data is publicly available, but the shift is happening right now.

Buyers are buying.

Yes, the economy is still bad, and the job market is still suffering. Nevertheless, apartments are really moving again. Great properties under a million are actually becoming scarce. Every apartment that we've listed in the past month or so has had hundreds of web hits per day, and we're getting offers right from the start. On the flip side, we're struggling with inventory for our buyers because the best apartments are moving quickly.

The market is still a bit slower for larger apartments, but they're starting to move as well.

Fortunately for buyers, prices aren't rising dramatically (yet).

In previous posts, I've described how the media helps fuel the fire; exaggerating trends positively in "up" markets, and negatively in "down" markets. If the past is any indication, once the media gets wind of increasing sales activity, there will be tales of bidding wars and buyer frenzy again.

Now is the time to buy if you want to be in front of the herd.

Reach me at: michael.sussilleaux@gmail.com

Would You Care for Some Old Sushi?

What do sushi and real estate listings have in common?

The answer: Neither ages well. In Japan you can buy sushi in Wal-Mart. Japanese consumers are very demanding about the quality of their sushi, and although we're talking about a decidedly mass market discount vendor such as Wal-Mart, high expectations remain. Throughout the day the price of sushi in Wal-Mart is systematically reduced every few hours as the freshness of the fish fades. After a period of time, what hasn't been sold that day is tossed in the garbage. Everyone wants the freshest fish. It seems reasonable to me.

Who wants what everyone else has passed on?

Inevitably one of first questions buyers ask is "How long has it been on the market?" This question is so important that I am going to repeat it in big bold type:

"How long has it been on the market?"

Sellers, this is a seminal moment in the sale of your home. It has a tangible impact on the value of your property. Really, it does. Time on the market directly affects the amount of money you will receive for the sale, (or rental), of your property. Let's analyze the powerful fundamental psychological forces at work and how they affect the purchase decision.

The subconscious impulse to ask the question basically has it's root in either fear or aggressiveness. The fear motivation stems from the comfort we all feel to varying degrees from being like everyone else; belonging to a nice safe group. Real estate transactions are among the largest investments/expenditures one usually makes in a lifetime, and there's a palpable fear of being taken, cheated or swindled. Asking how long it's been for sale is akin to asking "Is this safe?". If months have gone by and hordes of presumably intelligent buyers just like me have passed on the property, there must be something wrong with it. Do I want to be the fool that gets hoodwinked into buying a lemon? This trepidation is not simply a matter of concern over money spent unwisely, it is in a very large part a basal fear of not conforming to the group -- of announcing ones' commitment to an "unpopular" or flat out bad decision.

The question is more literal when coming from aggressive buyers. They're driven to varying degrees by the desire to reduce the asking price. Note that I said "reduce the asking price" and not "save money". There's a subtle difference. Ironically, for those buyers who exhibit extremely aggressive behavior the quest to "get a great deal" often reaches the level of obsession, and they will never actually buy.

MORAL:

If the answer to the question "How long has it been on the market?" is some variation of "a long time" it doesn't bode well for the seller. Buyers will either walk away from tainted goods, or they will feel they have the superior position when it comes to negotiating price.

Reach me at michael.sussilleaux@gmail.com