San Diego Housing Bubble News and Analysis

i'm not submitting lowball offers because the price I usually have in mind is 2000-2001 prices and that's like 30-50% off the current price. Most sellers will not budge more than 3-5% off the price, many don't think rationally in this regard and consider it an insult to their manhood!

For instance there is no valid reason the median price in Orange County should be anything more than $320-350k considering fundamentals, and that itself is EXPENSIVE!

I e-mailed a realtor with a 25% off lowball, I know that an e-mail is not an offer but she didn't even contact me and I gave my phone number and said I was unrepresented. It was actually a pretty reasonable offer, I am suprised that I never got a call or an e-mail. The property was a bank repo, was listed at 399k, reduced a week later to 389k, new stuff at the same sq ft from the bulder next door is 310k after incentives, but the repo had a better lot (but not that much better). I just explained the prices of the neighboring builders and if i was unrepresented that would save the seller about 12k, would they consider something around 300k, no call no e-mail. There is a 30 month supply of resales in it's zip code, I can only think she never got the e-mail. Too late now, I signed a lease.

Thanks for the responses. The REOs I've been watching are averaging a 5% drop in price every 2 to 3 weeks, but I suspect I would not get a response to a 50% off offer even though they will be there soon enough. (Oh, and these properties have been on the market a looong time).

I guess the sense of urgency to unload will change in due time.

Thanks again.

I have been renting in a never lived in condo developement in Hillcrest since November, which was extacly when the finnished developement. My landlord was an investor and recieved 3 of the 12 units of which he cannot sell for 5 years. Needless to say they were having trouble finding buyers. Apparently the main developers looking for business asked him to see if any of his renters would be willing to buy.

Long story short. He approached my fiance and I to see if we were willing to purchase and that he could work a very good deal. I agreed but said we would need to get a good deal off list due to the market conditions and not wanting to be underwater. They were listing @ 660, which was IMO about 30-40K to high in the 1st place according to comparibles.

I worked up a price that was the same mortgage payment as our rent minus HOA and 1/2 taxes. That put a purchase price right around 400K. They actually countered to 500K plus 20K incentives. Keep in mind they did sell the 2 one bed room units, smaller by 150 Sq ft and one less bathroom for 550 and 570K. So I thought that was very indicative of there stress level.

Anyway they have since started renting them out along with the other 37 unit building they have on the otherside of town that just completed construction.

"would you mind sharing whether you have had any trouble finding realtors to work with you?"

About a year ago I was submitting some serious lowball offers on homes that had sat on the market way to long. The offers were much lower than they were asking but realistic at the same time taking into consideration what the home would normally rent for. I wish I had kept some of the voicemails of the venom spitting agents basically telling me to go to hell.

Come to think of it I really wish I had kept those voicemails they will be considered collectors items of a bygone area pretty soon.

why are realtors so concerned about the price ? they get paid 3% of the selling price ? 3% of selling price is better than $0

Venom from realtors right now is understandable. Their world is crumbling, they have essentially been fired from their job yet they still have to go to work, but now without pay or hope of a payday. What is worse, many drank from the punchbowl themselves and are unable to pay their high priced car lease and are having their own arm reset. It's Randolph and Mortimer screaming "turn the machines back on." You piggy's with your rent to price ratio fundamentals are the cause of all their pain, you are ruining everything. I'd be pissed at you too. As an industry they went to the payday advance check cashing place on the corner. They earned three years pay in one year, pissed it away and now they realize they actually should have banked the big money from 2003 to 2005 because that was it, no soup for you. What makes it worse is they actually got used to it and convinced themselves that they deserved the income they earned in the boom, so having the beemer repo'd and taking that job at home depot would have been easier if they had never had a taste of the good life in the first place. The easiest way to be poor is to have always been poor.

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted ... would you go ahead and buy??

Let's take this home as an example

http://www.zillow.com/HomeDetails.htm?zp...

4br/2ba in SW Poway, 1695 sq ft, listed for $589,000 ($348/sq ft). Sold in 1998 for $235,000 ($139/sq ft), resold in 2001 for $358,000 ($211/sq ft). Has been listed on MLS since May.
Suppose you offer him 350k and he accepts.

On one hand, 350k for a 4br in Poway is a very good deal. On the other hand, it's still no pocket change. 4br houses go for a lot less in Temecula or especially in Houston. Finally, no one knows where the bottom will be. Maybe what looks like a very good deal will turn out to be a waste of money. Maybe sellers will weather the storm and houses never drop to 2001 levels.

Thoughts?

I have offered a 5-6% off the asking price this year and the seller did not seem to be very interested. 40-50% off will not work for sure at the current market condition. Good luck.

Here's a thought. The time to buy is after the sellers have all been thoroughly brutalized by the collapse. It's after they have come to accept that there is absolutely no hope, no light at the end of the tunnel, no cavalry coming to the rescue, not even a 2x4 to hang onto in a storm-tossed sea. (that enough analogies for you?)

We're not there yet. We still have knuckleheads who think that things will level out in 2008 for a couple years until wages catch up to prices. We still have would-be sellers taking personal offense at offers to purchase because they're too low. In effect, these people still blame the buyers for their problems and haven't yet accepted the idea that their problem was their purchase, not their sale.

You just need to allow the market conditions to do the tenderizing for you. That way it's not your fault they're losing out. Once the sellers are softened up enough to cooperate they'll sell.

BTW, as a group the sellers are but a small subset of property owners. There are lots of property owners who can and will hold. They aren't part of your transaction and as such you really don't care what they think. It's just the marginal owners who are compelled to sell that you want to see become demoralized. It sounds kinda mean until we acknowledge that prices are a function of market activity in the macro, not buyer malicousness in the micro.

esmith

Your statement dow not make a lot of sende to me becasue you are comparing apples and oranges. Poway is not Houston. Real Estate is Regional.

Ray you have made a key point. I have made a few lowball offers in the past year in the 5-10% range under the asking price. No takers at all... only a small subset even countered.

I have found much more reluctance for lowball offers in the more desireable regions as well. It has been a nogo for my clients in 4S, in La Costa Valley, in RP, RB and Sabre Springs. It did work for my client off of Olivenhain but that took awhile.

As you transition into the more desireable region the psychology/distress level changes rapidly. As Bugs pointed out the mindset is not even close to being where it needs to be, especially in those regions.

SD Realtor

The time to buy is after the sellers have all been thoroughly brutalized by the collapse.

Words of wisdom!

I totally agree with this post. Sit back and wait for things to "ripen"
I don't see any blood in the streets yet. Eventually, it will be knee-deep, then it will be time for bargain-hunters like us to go house shopping.

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted ... would you go ahead and buy??

Assuming that Poway home is in good part of Poway, YES my wife and i would buy it at 350k.

I have no idea how low it will go, but my instinct is that a house like that will never fall below 350k.

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted ... would you go ahead and buy??

The likelihood of this happening currently is about equal to finding and purchasing a Porsche Carrera for sale from a pissed-off spouse for $100 in the Sunday newspaper.

Obviously, one would take that deal.

"You just need to allow the market conditions to do the tenderizing for you. That way it's not your fault they're losing out. Once the sellers are softened up enough to cooperate they'll sell."

Making 2001 level low-ball offers is one way of tenderizing. Too many people are stuck in the first stage of grief (denial). They need to be helped through to acceptance.

Look up hopeless properties that have been listed for 6 months or more. Leave them a voice message or an email. Explain how much their house is worth based on fundamentals. Make them an offer based what their house was worth in 2000. (Ideally you should adjust for inflation, that's 20% between 2000 and 2007, but i'm not sure if incomes grew that much around here)

I recommend to get a disposable cell phone and a new email address for that. You don't want them to find out where you live.

I have been making 2002price offers. No budge yet. Sellerss are down to 2004 prices, but needs another few years of flipping knocked off.

"Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted ... would you go ahead and buy??"

Why not!! you can always back out if there are any problems with the property after inspection and everything.

esmith,you are funny!

SD Realtor, can i put on the spot and ask you how you feel about taking on clients that only want to pursue low-ball offers and in the 30 to 50% off range? I truly respect the viewpoints of you and the other realtors that are regular posters. (I'm singling you out because you were the one that responded to this thread).

To be clear about why I am asking -- I am in no rush to buy, but I wouldn't mind starting the hunt on the remote chance that I get luckier sooner rather than later. However, I wouldn't want to go down this path yet if it would just be a total pain for a realtor.

I did enlist the help of a realtor last year and I was very clear up front about what I was looking for at the time (low ball offers in the 10 to 15% range). He told me he was fine with that. However, when I never got a response from an offer on a REO that had been on the market forever, I followed up directly with the agent handling the sale. To my surprise, she told me that my realtor had never submitted my offer). So, he obviously was not ok with my strategy.

I hope this makes sense and I hope I am not putting you on the spot too much. :)

I think it is too early for reasonable (IMO) lowball offers. I made an offer on an El Cajon REO condo that is listed for 181K. It sold for 268K in 2005. There is an identical unit in the same complex listed for 161K (possible short sale?) and another for 175K. I offered 125K as that is what I feel comfortable paying and makes sense considering current rental prices. I didn't expect it to be accepted but was interested whether I would get a counter offer. I did not.

I'm not sure if counter offers are usual. My guess is it might sell this year for around 160K but I think I will do better for the money later on. I'm starting to think SFR (no HOA) may be doable in a few years. I'm going to sign a new lease in the next week.

The bank asking price is already 33% off the 2005 sale price. My offer was over 53% off peak, or an additional 30% off the current asking price. I think 2000-2001 prices seem reasonable as well but it will just take a few more years of chasing the market down for banks to get it.

I think it is too early for reasonable (IMO) lowball offers. I made an offer on an El Cajon REO condo that is listed for 181K. It sold for 268K in 2005. There is an identical unit in the same complex listed for 161K (possible short sale?) and another for 175K. I offered 125K as that is what I feel comfortable paying and makes sense considering current rental prices. I didn't expect it to be accepted but was interested whether I would get a counter offer. I did not.

I'm not sure if counter offers are usual. My guess is it might sell this year for around 160K but I think I will do better for the money later on. I'm starting to think SFR (no HOA) may be doable in a few years. I'm going to sign a new lease in the next week.

The bank asking price is already 33% off the 2005 sale price. My offer was over 53% off peak, or an additional 30% off the current asking price. I think 2000-2001 prices seem reasonable as well but it will just take a few more years of chasing the market down for banks to get it.

"I'm not sure if counter offers are usual."

Counter offers are not the norm on "low balls". But then again that's not the point. There are other threads on lowballs. I'll go see if I can find one in a minute. You have to work like crazy for a good lowball project.
"low ball" them all,let them go and check back later... keep looking. You normally wouldn't lowball then sit back and see if you won the lottery, on one property.

I like low ball strategies because it is a good way of giving fate a chance to work in my favor a chance to strengthen the upside. I did this looking for land to build on in mid to late 2003. I abolutely got a way better deal on the one I purchased compared the ones I got no response on. I offered only 10% lower than a list because I wanted it even at list and the offer was accepted.My neighbor just paid almost three times what I did for a smaller but otherwise similiar lot.

It is hard for a Realtor to work with a random lowball bidder because they can be pretty flakey and sometimes have wierd expectations.It can easily require 15-20 hours a week to do it right. Not a good risk to take on,except for the most trusted clients.
http://piggington.com/are_we_scared_or_s...

I have been looking a lot (although we probably won't buy until next summer, depending on how things look) and there was a house that we really liked at 1687 Fisherman Drive, 92011. It was listed at $1,429,000 for just over 4000 sq ft & brand new construction on almost 1/2 acre lot. My realtor knew I really liked this house, and asked me straight out what was keeping me from making an offer. I told her that we thought prices were going to drop significantly, perhaps 30% over the next 12-24 months (she'd heard this from me before). She then asked why I didn't make them an offer at 20% under asking, that "lots of people were doing that now". We decided not to do so, and I am sad to see that the listing is off MLS as of this week. I assume an offer was accepted since it's a new house and the builder is in close-out for that development. I'd be very curious to see what it went for. The listing agent told me the builder was very motivated.

As an aside, my realtor doesn't think (or won't admit) that the market is crashing. She says there was a needed correction, but that things are leveling out. Whatever!

I think the up coming RE auctions are going to set the new price trends and with thousands of homes going into forclosure
this is were we might get our lowball offer/bid accepted in the short term. Eventually the average home seller will have to stay competitive or just not sell. Like others on this thread have said once its common knowledge that homes are not going to fetch insane prices anymore will sellers begin to take a second look at a lowball offer, were not quit there yet.

As for me, I've stopped even submitting offers. RE is dropping so fast that I feel like I'm going to cheat myself if I buy now even at a discount. I'll let it run its course a little longer and jump in when it feels just right.

It's a little too early for lowballs. Ultimately the banks will be the most responsive to lowballs, anyway ... everyone else will just walk away, if necessary.

Maybe a time will come when banks eagerly encourage short sales, but that time is not yet upon us.

Hi JC -

Hey no harm in asking right? I would rather people be up front as that is how I am...

I am okay with taking on clients that are in the lowball camp. I don't mind writing up those offers and submitting them. I do let the clients know that there is no chance at this point in time that those offers will get accepted. I also do ask them (my client) if they are okay with me calling the listing agent and running it by them verbally so that I save both myself and the buyer time of writing up something formal. If the buyer insists on me writing something up then I will go ahead and do so. Also in alot of these types of cases I ask that the client help me out and do drive bys on the homes they are really interested in before asking me to show. You would be surprised how many homes get filtered out on a simple drive by. Anyways as you can see it is somewhat cooperative.

Most buyers who are really selective and looking for a deal kind of work in cycles.... they will be really active for a few weeks/months, then lay low for awhile, then repeat the cycle again.

********

I think there are some good points made in this thread about lowballs. I do think it is way to early for those homes (sellers) in desireable areas to accept lowball offers. They just are not doing it...at least not at the percentages we are all hoping. It cannot hurt to try, and I think that the odds go up if you are trying to lowball in Eastlake or El Cajon as opposed to Carmel Valley or Carlsbad...

Amy even though the home you really like didn't happen for you just stick to your guns, it will happen someday. For your realtor to not acknowledge what is happening is not uncommon. Believe it or not there are realtors who firmly believe the correction is done. Even if it flies in the face of all logic.

I should add that after the bank rejected my offer this week, they immediately lowered the asking price 9K to $171,900. I guess my offer must have been the only one? At least I feel like I'm doing my part to restore sane expectations.

I write the one page Letter of Intent rather than do a verbal SDR. It is non-binding and I like the idea of the listing agent getting a piece of paper.
As far a receptivity to lowballs goes, I would recommend not writing any offers for less than 10% under list price, even for competetive list prices. (That is for you people who just "have" to buy now).I mean that for all neighborhoods including "less distressed" ones and absolutely in housing tracts where similiar houses are coming on the market. If they won't take 10% off ...move on...unless 10% of X price doesn't matter to you.

Amy, Zillow does not show a sale for that property (though maybe it's not in the system yet), and it estimates that the house is worth $1,260k.

http://www.zillow.com/HomeDetails.htm?zp...

In Del Sur, houses of this size/caliber went for 500-600k in early 2000's.

I wouldn't assume that the house was really sold. Even if it was, I'd make a note of it and follow up in a year. Chances are it will be REO.