That Deal? It Doesn't Exist [Yet]

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By Ian Slater | April 28th, 2020
 
The real estate market is not the stock market. Say it with me-- the real estate market is not the stock market. One more time, just to make sure! The real estate market is not the stock market! Good!
 
As I am very much in the business of data collection and sharing, I wanted to do something that most brokers won’t do, and share some offer information with all of you reading the blog. Offers I have received this week:
 
  • 28.5% off of asking price on a two bedroom rental listing
  • 31.0% off of asking price on a one bedroom condo listing
  • 26.0% off of asking price on a two bedroom condo listing
  • 34.0% off of asking price on a four bedroom condo listing

And this doesn’t count the ample conversations I have had about more “hypothetical” offers that would likely fall within these ranges if I had guided the clients to move forth on them.
 
I am never a broker who reacts negatively to an offer, and I absolutely appreciate the fact that many are opening offers, or that a buyer is simply feeling out a seller, or that a broker worked tirelessly to bring the initial offer to the table. I only seek to share these because there is a point I’d like to drive home.
 
The stock market has the ability to fluctuate drastically in a short period of time, and we have seen it do that in the last several weeks. The real estate market does not do the same. It simply can’t. It takes a significant amount of time for a seller to move from one mental price to the acceptance of another, and it typically occurs in very small steps. Not to mention even if a deal gets accepted, it takes time (45-60 days usually) to finance and close. To expect something to trade at “X” on Monday and “X - 30%” on Wednesday because of a global occurrence, really no matter how bad, is plainly fantasy. 
 
There are so many factors being discussed around the coronavirus pandemic and how they will affect the market, with credible arguments on both sides. 
 
The positives argument: potential pent-up demand, more international attention on American real estate, desire for hard assets vs. a recently volatile stock market (read: real estate), locked-in low interest rates as a predictable policy.
 
The negatives argument: unemployment causing downward pressure on prices, developers with too much product to sell, exodus from cities, wage stagnation, fear of making large investments, recession/depression.
 
The reality: nobody really knows how this will pan out.
 
So the fact of the matter is, that deal just doesn’t exist in the market right now. A buyer making those types of offers, unless extremely lucky to find a seller under serious duress, is likely not going to get very far and is going to end up very frustrated and borderline annoyed. I have seen it firsthand. 
 
But, does that deal have the ability to exist in time? If the negatives argument wins out, yes, there is certainly a possibility that discounts will grow over time and we will see some of the best prices we’ve seen in prime global markets in years, if not more. But if the positives argument wins out, no, prices likely won’t dip at all. They may very well climb.
 
Which is why I say that deal doesn’t exist, with the big caveat of YET. Keep in touch with an advisor, collect evidence of where offers are falling and where they’re being accepted, and trust the process. Just like the stock market: it’s incredibly difficult, if not impossible, to predict it and outsmart it. 
 
 
 

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