Purchase almost anything in life and it’s a straight forward process – there’s a price posted and buyers either agree to pay that price or, in the cases of cars, swap meet items, garage sales, etc., the buyers bargain for a little while until coming to a happy medium with the seller and enacting the transaction.
Not so with real estate. Here, buyers immediately turn into amateur psychologists … there’s a near constant desire for additional information, generally for the purpose of discerning the sellers’ intent and motivation, and that effort often turns out to not make much difference in the end.
We are, collectively, just not that smart. But when it comes to buying homes we think we are. And this the questions, presented in no particular order:
1) How much did the sellers pay for it? There are rare situations where this matters, such as during the run-up of 2005 when values were changing daily. In general, though, it’s an irrelevant question.
Picture purchasing a stock, say Apple. Right now it’s $502 a share. When I started working at Charles Schwab back in 1996, it was trading for $40 and change. If you’re looking to buy Apple, does it really matter at all that the seller purchased the stock for $45 a share 10 years ago? Not whatsoever. That was the market then, this is the market now.
While it’s understandable not to want to contribute too much to someone’s profit, the reality is it doesn’t at all matter what the seller paid for the stock. Or a house.
2) Why did the last contract fall through? Perhaps you have more faith in the collective intelligence of the human race than I do. (If so, turn on E! for about 30 minutes and you’ll be disabused of that notion.) There is a reason traders tend to run contrary to public opinion – the public, en masse, knows nothing.
This past week, one of my own buyers changed their mind on a property because the backyard was in too good of a condition to work for a rental property. They made this decision after seeing it in person, where it was identical to the photos in the MLS. In other words, there was no new information from the time they made the offer based on the MLS to the time they changed their mind.
They just changed their mind. Got cold feet. End of story. And their loss will be to the gain of a young family purchasing their first home, who will be happy as heck to have this house. It happens. Why they changed their mind matters not to this new couple. And it shouldn’t – it’s irrelevant.
3) What did the last inspection say? Two weeks ago, sellers of mine had to pay $300 for a structural engineer to check out a “missing” 2×4 in the roof truss structure mentioned by an inspector. The verdict? There was no “missing” 2×4. There was a bracket there but, structurally speaking, no point to have a 2×4 where the bracket happened to be. And so it was skipped.
Three hundred dollars to confirm what the sellers’ own inspector told them (or didn’t tell them, since it wasn’t called) back in 2010 and to learn that the buyers’ inspector was, as House would say, an idiot.
Hire your own inspector. Don’t worry about the last one and what he did or didn’t call, did or didn’t know. It’s irrelevant.
4) Why are they selling? Only answer that matters – “because they want to move.” The only reason buyers ask is so they can justify in their own mind the offer they’re going to make, looking for desperation that may or may not exist. Don’t outsmart yourself. Work the numbers, listen to your agent (assuming your agent has a functioning brain) and make an offer that works for you. Stop worrying about why they are selling – it’s really irrelevant. They’re selling because they want or need to.
5) Why has this home been on the market so long? Maybe it’s the house. Maybe it’s the seller’s stubbornness. Maybe it’s the agent’s unique decision to post one front photo of the house. Maybe it’s because the seller only will allow showings between 1:15 and 1:30 on a Tuesday morning. Again, trust in the collective stupidity of mankind and your own intelligence and make a decision based on what works for you, what might not have worked for the masses – it’s irrelevant.
Buying real estate is different because of the sums involved but, for the most part, it’s not much different than any other type of purpose. When I bought my new computer monitor this week at Fry’s, I didn’t wonder why they happened to be selling the monitor. It was for sale. That was enough.
Same goes for the couch I bought off of Craigslist. It’s for sale. Looked good. It’s mine now.
Stop thinking so hard and leaving yourself caught in paralysis by analysis. It’s irrelevant. And pointless, too.