Recently I’ve been engaged in a not-so-pleasant tug of war with potential buyers. I’ve gotten quite a few emails or calls over the past few weeks from potential buyers who are very specific about what they’re looking for, and even more specific about what they’re willing to pay for it. Now, that’s not so uncommon. What is different is that the "what they’re willing to pay for it" is so low, and they’re so confident that’s the right price.
A few days ago I got an email from someone I’ve been casually communicating with for months. She’s looking for a good lakefront house on a nice, large lake — with an absolute firm price cap of $350,000. The tone of the email was "We’re savvy buyers and we know there are lakefront houses on the market in this price range and certainly more to come with the slowing market." With a firm price ceiling of $350,000, a buyer’s target price is more likely $300,000 to $325,000. Now, I’m pretty familiar with Sullivan County inventory, particularly lakefront, and I’m not seeing any good lakefront houses with asking prices in that range, or even somewhat higher that are likely to sell in the low $300’s. That’s now to say that in 6 months or a year we won’t see that – I don’t have a crystal ball. But right now I don’t. Yes, there are a few ‘lakefront’ houses on the market in the low $300’s here. But they’re listed at that price because they’re have some factor that’s less appealing, or they’re on a lake that’s less attractive. But this buyer is absolutely convinced that $350,000 is the absolute market value for a good lakefront house here.
I don’t believe this particular potential buyer has been to Sullivan County, or seen our different lakes. They’re internet shopping, and forming their opinions. But anyone who knows our lakes knows that Amber, Weiden or Mohican are VERY different than Wolf or York or Tennanah. A house at Wolf Lake would likely sell for 50% more than a similar house at Amber Lake. Just like a 2 bedroom coop in Chelsea is more expensive than a 2 BR coop in Riverdale.
I emailed them back and said, "Sorry, I just can’t help you at that price." Now, there are some interesting lakefront houses that are priced from $400K to $450K that might sell for slightly under $400K. But I don’t think they’ll sell for under $350K. Should I send them the listings with a come-on that maybe we can get one for under $350K, spend my time and gas running them around to look at them?
Another potential buyer recently emailed me a property listed at close to $1M. He’d done a calculation, based on square footage and cost per acre, and said that he thought the house should be priced at no more than $550,000 – and would I please email him some similar properties for him to consider that I think should sell for that $550,000. Now, I do think the property he sent, which is listed at $975,000, is priced somewhat high. I personally think it should sell in a range of $750,000 to $800,000, based on the view (pretty fabulous), setting (very private) and house (4,000 sq. ft., quality construction.)
But that potential buyer had somehow determined that house wasn’t worth any more than $550,000.
These are extreme examples, but I’ve had a number of contacts with potential buyers lately that are similar in tone. Basically, they’ve decided what they want and what they want to pay for it with little or no ‘boots on the ground’ experience with this market. Many have never even been to Sullivan County, and have no idea of the difference between Woodbourne and Jeffersonville or between Mohican Lake and Swinging Bridge.
Where are people coming up with these value numbers? If I called a broker in the city and said I wanted to buy a one bedroom in Chelsea for a maximum of $250,000, they’d hang up on me. If there’s a severe market turn in the city over the next couple of years, that might be realistic in a couple of years, but it isn’t now. Anyway, real estate doesn’t rise or fall in huge increments in 24 hours like the stock market. In a slowing market, a one bedroom in Chelsea listed for $600,000 might go for $550,000 or even $525,000, but it will take time for that to drop to $400,000 or less, if it drops there at all. Likewise, a modest $400,000 lakefront house might sell for $375,000 or $360,000, but not likely at $300,000 or $325,000.
I’m used to working with people who have budgets, and helping them understand the trade-offs. Commonly I hear from potential second home buyers who are looking for a charming farmhouse around $200,000. Now, when you search on the internet, you’ll find a bunch of them here in Sullivan County, priced from, say, $175K to $225K. But in that range, they’re often are ‘locationally challenged’ — on a busier road, in a village or with close neighbors — or have low ceiling heights (common to many older farmhouses, but the kiss of death to value.) I try to be honest about the downsides and tradeoffs of the houses people find on the internet and email me. Sometimes I feel like a crumudgeon and a Scrooge, but I’ve been out with hundreds of people over the years and think I have a pretty good idea of what a lot of people, particularly second home buyers from the city, are looking for.
Particularly when buyers are on a tighter budget, my job is to help them understand and prioritize the inevitable trade-offs – privacy, house style, quiet location, whatever. I was out with someone earlier this week who gravitated – on the internet – to houses in classic styles with ‘charm’. But in her price range, most of those were ‘locationally challenged’. Before she came up, I told her I’d like to include a few other houses in different settings that might be in a style she didn’t necesssarily resonate with, but the settings might be more appealing to her. We even swung by a couple of vinyl sided ranches. At the end of the day she had a real good grasp of the trade-offs. I didn’t show her more expensive houses to get her to up her budget, but rather a range of options within her budget. As she was leaving to drive back to the city she said "I understand that in my budget range I have to make trade offs. But what I’m really excited about is how much I saw that I really liked, and places I might not even have considered."
I felt great. I’d really done my job, and she’d let me do it. She may or may not buy a house right now but ultimately I think she will. Its so different than those folks who have something so set in their mind, in terms of house and price, and don’t let me do my job.
Lately, I’ve been emailing them back and saying "Sorry, I just can’t help you at that price." Because I realize I’m in this business to help people find houses, not just deals. If all you’re looking for is a deal (and don’t get me wrong, I’m pretty good at sniffing them out), then I’m probably not the guy for you.