Buyers and Sellers

Buyers and Sellers

Buyers and sellers are typically treated as two different entities. Two separate forces, destined to be enemies and forever embracing a polarizing view of markets, and real estate. Buyers and sellers are cats and dogs, they are Hatfields and McCoys, they are Lake Geneva and Michigan. Yet in the face of these differences one key element is often overlooked, or at least not articulated. Buyers and sellers are the same people. If I’m a buyer, I either was a seller or I will someday be a seller. And then if I sell someday, I’ll be a buyer again, unless I’ve been brainwashed by the likes of James Altucher into thinking that renting is for me. In any case, buyers are sellers, and sellers tend to be buyers.

This common thread should make the pricing of property easy. Sellers should understand that buyers are just like them, in fact, they are them. If a seller wants $1.00 for his product, the buyer wants to pay 80 cents. If the buyer of that product was able to procure the object for 80 cents, and decided that the product no longer fit, or suited, or tasted right, that buyer would be a seller. He’d ask $1.00 for the product. The universal theme running through buying and selling is unavoidable, and it should make for reasonable buying and selling with each party understanding the goals and motivation of the other. After all, a buyer who might buy will soon be a seller who may or may not sell. It is dawning on me now that I enjoy writing confusing things and would do well to write for the simple joy that causing confusion gives me.

Buyers, I don’t always get. Sellers either. Both sides tend to deal irrationally, particularly when it comes to vacation homes because just as no one needs to buy a vacation home, most do not need to sell a vacation home. Sure there are exceptions, and the exceptions create a voluntary market that can thrive or wane on the whims of the buyers and the sellers, who, as we discussed earlier, are the same person. The voluntary nature of this market is best understood by considering a typical $500,000 vacation home sale. The seller, bold and brash and possibly clutching a handbag that cost more than my first two cars, more than likely doesn’t have her last $500k tied up in that home. Likewise, the buyer, coming to the table preceded only by his bank wire, isn’t bringing his last $500k. This is disposable income, even if it is more thoughtfully spent than most disposable income (see: previous handbag mention). The seller has money to spare, as does the buyer, and this creates the most voluntary of all markets. A market where no one needs to buy and no one needs to sell even though whole economies hang in the delicate balance of this unnecessary, but delicious, liquidity.

It’s in the voluntary nature of these sales that prices can get out of whack. Buyers, those same buyers who were or might be sellers, and sellers, who may soon be buyers, can view list prices in a market as though each were thoughtfully measured and weighed. On the surface, individual markets are defined by average list prices and average sales prices, both creating indexes that real estate markets give into easily. Average sales prices and average list prices and average days on market- these are all averages that create impressions of a broad market, yet they assume that list prices are accurate reflectors of the market value. They assume that each seller sat with an agent and poured over comparable sales and examined market behavior and considered the mood of their particular market. They assume that list prices were thoughtfully assigned.

If they were assuming these things, they’d be dead wrong- particularly in a market where participation is voluntary. Over recent weeks, the Lake Geneva real estate market has received several new, rather expensive, offerings. These offerings lend a lofty sense of value to our market, though the harsh reality is that recent list prices do little to reflect actual value. Sellers can operate in separate worlds. These worlds ignore the fact that these sellers are also buyers, and as such should look at the market through both sets of eyes. In these worlds, value is a feeling that cannot be backed by comparable sales or current inventory, instead preferring to be dictated by a seller who, perhaps most importantly, understands that the market is voluntary. If a market is voluntary, and the only requirement of participation is a signature on a contract and a sign in your yard, why not throw some outlandish price at the market and see what sticks?

This is the thinking, and this is the problem. Have you ever watched the absurdly annoying Sandra Rinomato talk buying “strategy” with buyers? She rarely looks at the market surrounding her, and instead prefers to “negotiate” under the pretense that the list price is an accurate reflection of value. This is why I see shows on my television where buyers pay $345k for a home that was listed at $349k and answer the door a few months later with smiles painted on their ignorant faces instead of the tears that should be soaking through their new Pier 1 entry rug. There are properties that boast correct list prices, many of them in fact. These are properties with sellers who did consider the market before slapping a number representing imaginary value on their listing contract. There are properties that represent value in Lake Geneva, but they are surrounded by properties that skew the perception of value to such a degree that I feel sorry for the buyers who find themselves about to knock on that sellers door.

Buyers and sellers, listen up. Sellers, if you have three Realtors through and they all tell you your house is worth $700k, please do not list it for $1.3MM. Just don’t do it. I know the sale doesn’t matter to you, but avoid having me mock you in my mind and on these pages and just don’t do it. Buyers, I feel a bit more sympathetic towards you. I know you don’t know the market very well, even though you purport to. It’s not your fault. It’s just that you need someone to guide you through this gauntlet of overpriced insanity, and there’s a robust Realtor in Williams Bay who just so happens to be the best tour guide I know.

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