July 22, 2022

Conditions vs. Expectations

Remember the market conditions a few months ago? Who could forget? Too many buyers competing for the few homes available, struggling to get their offers accepted. The end result: crazy prices and lots of frustration.

In just a few short weeks, market conditions have changed. Prices have backed off and interest rates have pulled a lot of air out of this market. You’d think buyers would be flocking back to the market and enjoying what is turning into a buyer’s market.

You’d think.

But, there’s a new reality – and it seems someone forgot to tell some sellers that the market has shifted.

A new listing hit the market 5 days ago. Beautiful bungalow on an acre, with an unfinished basement and in need of some landscaping. Listed at $1.95 million. In this market, I expect this home will take just over 30 days to sell, and I expect it’ll sell somewhere between 93-96% of list price.

Much to my surprise, less than an hour after I showed the property, we were notified of a pending offer coming in. We were the 6th showing and now had to compete against another offer.

So much for my advice that we wouldn’t have competition, and we’d be able to add conditions to our offer. New strategy just like the old strategy: send in your best offer. The difference today is we kept the conditions in and we didn’t offer over list price. The comparable sales data suggested the house was priced at the very high end of the value range.

My next surprise; neither of the offers were accepted! In fact, both offers were flat out rejected. Now I don’t know what the other offer was but I can only surmise based upon our offer that they must have been reasonably close together. We were told our money was too low and our proposed closing was too long. The condition clauses didn’t seem to be the issue.

Someone forgot to tell the Sellers to adjust their expectations in this market. Two offers in less than a week on a $2m property in a slow market should have resulted in a sold sign going up on this house. This is typical in a shifting market, where one side of the transaction is out of sync with the current conditions. It took a few weeks for Buyers to realize how much the market jumped last year, and I suspect it’ll take another month or two for sellers to become a little more realistic in their expectations.

Frustrating times for both sides. Sellers are still caught up in what their home would have sold for a few months ago, and reluctant to adjust their expectations. Buyers who have been on the sidelines waiting for the market to settle are frustrated that their offers reflecting the new conditions aren’t being welcomed or accepted, yet.

It will be interesting to see how long this tug-of-war continues before both sides accept the new pricing reality and higher interest rates. It won’t be pretty. Still, regardless of the economy, people will continue to grow their families, find new jobs, get divorced, and pass away – and their real estate needs will be constant.

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