A Message to my Buyer’s Agent, Robert Jones:
I wanted to engage with you for obvious reasons since you represent the majority of buyers on my team before syndicating an article on the 2016 Fall Buyers in Oakland, Piedmont and Berkeley. As one of the two top listing agents in the premium zip codes in our markets and working all price points, the Buyers are very different this Fall compared to 2012 – 2015. This year our Fall Buyers are saying to their agents (1) I would write an offer on that listing, but I don’t want to compete and (2) a close second response from buyers’ agents “my buyer chickened out at the last minute”. I have always said that Buyers live by the herd mentality (although they will never admit it) and they only want to bid when 5 – 10 others are writing. If they hear that only one or two are writing this Fall, we are hearing they do not want to compete. One to two offers is not competing. Having 5-10 offers in the Spring Market is competing.
So, if I have a buyer who ever says these two excuses to me, I would say “Great! Wait until the Spring Market so you can compete with 5-10 offers plus expected rising interest rates. A brilliant decision!” I would then advise them to take the rest of the year off and wait until the winter rains end in March and then search for your home. Why not pay more for your house and/or get less in 2017 versus 2016 due to potentially rising interest rates. Makes great sense.
How to handle buyers this Fall to keep them from making a bad choice by not buying now? You just have to be honest and ask them are they ready to really compete in the Spring Market for 2017. If their answer is yes, then by all means take the next six months off with your buyers. They may not actually be real buyers. Just when I heard you call a mortgage broker to get your buyer into position number one by increasing their offer by another $50,000, you were wise to call their lender to see how much their monthly payments would increase. When I heard you say $40.00 a month and the buyers did not increase their offer to be the winning offer, I was disappointed in another example of not wanting to compete. Perhaps your next question to their loan officer should have been: “If rates go up one-half of one percent in the Spring of 2017 and with ten offers they would have to write $150,000 – $200,000 more, what would their monthly payment be versus buying today?” The answer from the loan officer would have been after spending another $150,000 – $200,000 next year (provided they have that extra down payment money) and rates going up, their monthly payments could be $400.00 or more next year.
If you still cannot do your clients a financial favor today, at least prepare them for next year so you don’t start from scratch with this conversation. Rather 2017 should be, you need an additional $200,000 more in a down payment and your monthly house payment is much higher than last year due to rising interest rates. Also, let them know they might be buying a smaller home in their second or third choice neighborhoods. Buyers cannot live in the Fall Market of 2016 next year. You can never go backwards unless there is another 9/11.