Seller’s in today’s Buyer’s market – it’s not a pretty sight….
The first two weeks of August saw quite a bit of activity, although it has not necessarily culminated in sales. What I am seeing are many buyers who are actively out there looking while remaining on the sidelines in terms of making a purchase. Most are completely uncertain about the housing market in general and who can blame them with all the bad news we hear every day on TV?
One client asked me how to make sense of all of it and I have to admit, it’s not easy. Not only do you have the external factors impacting the market (i.e. the negative news, continuing problems with the sub prime loan market, overdevelopment in certain areas of the mainland along with the simple fact that here on Kauai, we simply have too much inventory) but within that there is quite a bit of disparity in the listing prices that are often hard to explain until you start looking at the seller’s history.
Basically, I see four types of sellers in today’s market. First up is the long time owner / seller who REALLY wants to sell. These sellers generally have plenty of equity, want to sell, and most importantly, are looking up from their initial investment to measure their gain rather than looking down from what similar properties sold for in 05 and crying that they “lost” money. These seller’s properties are going into escrow because they are lowest priced unit in the area and / or offer the best value for the dollar. Granted, these sellers may not be getting their asking price but they are coming out ahead with equity in hand.
Second, are the long time owners that are very similiar to the first group with one major distinction – Even though they have the equity, they still price high BECAUSE THEY CAN. By that I mean these sellers typically have a low mortgage and can afford to let their property sit for as long as it takes to find that one special buyer who is going to see the value of their overpriced unit and pay above market for it. I call them “wanna be sellers.” They want to be sellers but are not willing to take the action necessary to invite an offer. If and when they reduce, it’s usually not by much. They say “bring me an offer” but why would someone do that when there are often less expensive properties in the neighborhood? Time will tell if and when these properties sell.
Third are those on the other end of the spectrum, the ones “caught in the squeeze.” That is, they bought at the height of the market and are “upside down” just by listing their property at current market value. By “upside down” I mean that their list price is lower than what they paid for the property a few years ago. This is not a comfortable starting point and it only gets more painful as the market softens.
These sellers may find themselves in the unfortuante position of losing money on the sale for the sake of getting out from under the property, especially if they are unlucky enough to have obtained an interest only and / or adjustable rate mortgage that is now going up. They have to accept the loss and write it off or sit tight and wait another year or two to sell. If they can afford the wait, that’s the best option as it will also help reduce the surplus inventory we are now experiencing. These sellers usually try to sell for awhile but as list prices go down their ability to absorb a loss may be difficult causing them to withdraw their property.
What can happen to some of these sellers is they may end up with a “short sale” whereby the bank forgives part of the loan for the sake of making the sale. These sellers are usually looking at foreclosure. The bank certainly doesn’t want the property back so they decide to take less rather than get nothing at all. Short sales require approval of the bank making a lengthy process. This is another topic by itself.
And finally, many sellers are in the middle of all of this. They have a little bit of equity, have had their property for 4 or 5 years and hoped to make a killing when they sold. It’s hard for many of them to see their projected capital gains diminish right before their eyes but if they can come to terms with making less instead of holding out for more, they too can be sellers.
Of course, every seller’s situation is unique and I am not implying that every single seller falls into these situations, but I will say that I have found it helpful to examine the seller’s “position” in the property “ie his equity” when trying to understand and explain disparity in pricing within similar properties and neigborhoods. This is just my personal observation and opinion on this beautiful sunny day in Kauai —
More next time on the buyer’s end of things.
For in-depth information on any Kauai property you are considering buying or selling– do not hesitate to call or email me.
Aloha,
Elaine Schaefer (R, GRI, ABR)
Broker in Charge – Princeville Resort Office
Graduate, Realtor’s Institute
Accredited Buyer’s Representative
Top Producer 100% Club
RE/MAX Kauai
Princeville Resort Office
POB 223632
Princeville, HI 96722
cell: 808 639 2935
home fax: 1 808 440 4552
email:soldonkauai@yahoo.com
website: www.kauairealestatenow.com
blog: www.blogs.alohaliving.com/princeville-condo-sales
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