Today I had a weird experience in my Downing-Frye Realty 5th Avenue office. Our agent Jerry Breshin was on duty when a fellow walked in who had previously worked with another one of our agents, Warren Dufner. I don't know how long ago, but at some point, a few weeks back this fellow had been in Naples looking at villas in the Blue Heron neighborhood, off Radio Road.
Blue Heron was largely purchased by last minute investors, despite a lackluster developer, so ultimately it took a harder hit than many other developments -- and since I own there among my other properties -- I tend to think the extreme hit was unfair. (Why wouldn't I? I'm human too!) In any case, since Warren was out of town, Jerry volunteered to reshow him villas that he had seen previously.
One of the short sales remained, but to his disappointment, the two villas that were listed for $205,000 were gone. Now he was having to look at several in the $220s. (At the height, several of these sold in the low to mid-400s). In talking with him about the current real estate climate, I told him we had just gone through and were still in fact going through the stage of the "angry buyer." The definition of that would be the person (I should say skeptic) who has read all the media reports for months about how this has been such an incredible "buyers market" for nearly three years and how in light of foreclosures and short sales, etc., they can still accomplish the ultra-ultra-steal when in fact they can ONLY do the ultra-steal. (Yep, there is still time!) And soon it will be just the "steal" which by season should segway into the "good buy."
But the funny part is that this fellow actually told ME that he was now in the 'nervous' stage.
Now over the past few years that would have meant he was 'nervous' that if he bought now, prices would go down. But the fact is he was 'nervous' that prices would go UP if he didn't act this summer. And he already had evidence that such was the case. Wow! Talk about a change in direction! The "Reverse Nervous Buyer!" Do I hear angels singing somewhere?
Now I can't blame the "Angry Buyer". (Thank goodness our "reverse" potential buyer had already seen the light, but the truth is that the "enlightened buyer" is still a rare scenario right now.) If I'd had some money to invest over the past three to six months, I would have been filling up my shopping cart when the true bottom hit for many neighborhoods. That was the point at which people felt they couldn't give anything away at any price and that helplessness caused some people who didn't even have the need to do so to basically give their properties away in a kamikaze move. (I had a Wall Street gazillionaire price two of his units soooo low in order to create a tax loss that Realtors in this "down market" were giving me a "heads up" about the typo in my MLS listings.)
And when people who can afford to hold their properties start doing the kamikaze, well heck, that forces the mere mortals among us who can't afford to do the "limbo" ("how low can you go...") to fall under the bar into the dreaded foreclosure or short sale due to a lack of funds to take to the closing table (in order to compete price-wise) and not enough income to keep a holdin' on. (Heck many REALTORS have lost their homes in this economic environment.)
My rich seller, for example, sold his Blue Heron villa on a lake for $195,000 -- two bedrooms and a den, two-car garage, tray ceiling, bay window in the bedroom, tile throughout the main living areas, never lived with many upgrades, only five miles or so to the heart of "Olde Naples." You get the idea.
And the funny part is that this unit sat on the market at that price for three weeks because people (Realtors and clients alike) were afraid that it was too good to be true. Except for the folks of course who offered us $150,000 for the unit and were mad that we wouldn't consider it. They knew we were outrageously low, but what the heck why not take off another $50,000.
I even had a Realtor tell me that I was doing my client a disservice in telling him not to take the $150,000 because prices were probably going to go much lower. Yikes. But the truth is Realtors are people too. We don't have a crystal ball and we are just as susceptible to the things we read as others.
The lesson for all of us though is to remember the theory of the self-fulfilling prophecy. And that is what we have just gone through. The pendulum took a swing waaaay too far to the right because of what was essentially similar to a "run on a bank." Fear operates both ways and is not always justified.
And though real estate always runs these cycles, this particular "peak/trough" was mighty steep from the top. From 1988 to 1996 Naples went through a horrendous downturn in the market culminating in a 55% drop. Then it racheted way above the initial drop within seven to eight years. This go-round our down cycle did a free fall of 50% in just over two years. No wonder there was so darned much screaming going on! People were screaming on the way down even when they didn't need to scream.
National developers even did the kamikaze locally, most notably Centex.
Which leads me to refer to one client of mine in particular who makes upwards of $500,000 a year. He had his wife spend several days with me looking at properties. (They were referred to me by a long line of referrals in one chain that started some six years ago.) Even though they knew my reputation for being very knowledgeable in terms of best buys and prices in a three-county area, he still considered me the adversary. He just KNEW I couldn't be correct about the pricing. I couldn't be doing my best for him in terms of twisting the arm of the developer.
Frankly that has been a hard "row to hoe" for me because I'm always sad to see people overlook the values of today by looking back. Funny statement isn't it. But that leads to the angry buyer. And in the trickle down effect.
Now I don't begrudge spending days with clients, buying meals and using up lots of gas, for no financial return because I know that is the nature of my business. You win some, you lose some. But it is frustrating to do so when clients who should view you as a hard-working friend, see you as someone who is probably not doing the best for them, best case scenario; or worse yet, as someone who is willing to risk everything to make a few extra bucks in commission and, by golly, they as the client are not going to fall for that.
This client of mine "bless his heart" was so diligent in his research about a development in Lely Resort that I had turned him onto (among many other neighborhoods that fit their criteria in Lee and Collier Counties) that he was constantly sending me real estate transaction reports from the Naples News (our local newspaper) wanting me to find out why "such and such person" got this coachhome for a particular price when Stock Development would not accept his offer which was $50,000 or more higher.
As it happened, before Stock acquired this group of townhomes the properties were owned by Centex and, as mentioned earlier, that company did a "well under developer's costs" giveaway months ago in order to raise some capital and reduce inventory. Interestingly, at the time, that sales strategy barely raised an eyebrow because no matter the price, most potential buyers were just sure there was $100,000 more that could be sliced off the price. So ultimately the buyers of these units were either locals who knew the neighborhood well, risk-takers, and/or development reps.
As far as I know, my client has decided not to go forward with anything because in his mind the discrepancy between what the units were selling for three months ago and today's price juxtaposed against what he reads in the national media has him convinced that Stock will have second thoughts about his offer (they won't) or worse yet, he probably somehow thinks I was in cahoots with the developer and is teaching me a lesson. Little did he know I was trying to throw my weight and reputation and the weight of my team behind a special deal for him. However, even that was not enough to make a difference in this slow, but decidedly upward movement.
That's the hard part for me because as a long-time journalist, I always used to view salespeople as somewhat suspect (which granted is sometimes the case) but in most cases the opposite is true. Realtors for the most part are hard-working devoted people trying to get the best buy they can for their client. And in most cases if they miss the mark it is because they lack knowledge. Just as in any field, some people are more knowledgeable and more experienced than others.
In this scenario I even took his wife to every development that I WOULD NOT have recommended because they had found these places on the internet and I had to let them see for themselves why my suggestions were so much better. (Otherwise they would assume I was hiding something or being lazy.) At least they ultimately agreed with me in that regard, but try as I might I just could not overcome this angry buyer, one who actually had the ability to buy.
I even sent him an article about Toll Brothers saying that Southwest Florida was the bright spot in their portfolio. He sent it back highlighting the "devil's advocate" portions of the article to show why Stock should have taken his offer. The truth is if Stock was as desperate as they were a few months back, they would have. They weren't beyond those kamikaze maneuvers themselves. But now, not only are they being semi-picky on their sales, they've even cut back the incentive to Realtors. They aren't kissing our bazookas as much as they were before.
That says something. That says this is "woulda coulda shoulda" time and okay, maybe you might not make as great a deal as you could have three months ago (although in some neighborhoods that is not the case), but it does point toward this scenario: This is most likely the time that people a year from now will say -- "Man, I should have bought last year." There are still fantastic deals out there. And now that developers are starting to raise their prices a bit, resales will suddenly become the best food on the plate.
Oh, there is another kind of buyer in the marketplace as well: These are the people who as with the buyer above tell me that they are just going to leave it in the hands of God if they should get a place. If it's meant to be, then their price will be accepted. If not, it wasn't meant to be. But the truth is with the offers they are placing, not even God can intervene. Fifty percent off 50% is a tall order for anyone. And remember, God helps those who help themselves. But I have to say never in all my years of real estate have I heard so much religious jargon in regard to real estate. God is smart enough not to take a job in real estate in this environment : )
Onto another topic: In regard to the credit card roulette I wrote about last article ... turns out my idea wouldn't work. I would have to hypnotize the servers to ALWAYS pick 16 and anyway when I went back to Cafe Luna to tell Ed that American Express only had 15 numbers, he beat me to the punch telling me he was wrong ... that his friend said he had asked the waitress to pick a number between 1 and 15 because an Amex card only has 15 numbers.
Darn and I thought I was soooo smart!
See you later!
