Rules of the Game

Is there any point in writing about last week’s stock gyrations? What sense can be made out of a market which goes up 400 points one day and down 400 points another? Things just did not change that much between Wednesday and Thursday! I am grateful that real estate, MY product, is not so profoundly reactive, if only because it can’t be traded by making a phone call. The fact that real estate cannot be sold quickly stabilizes the market and of necessity injects some thought and rationality into the process.

Speaking of thought and rationality and real estate, let’s take a look at the negotiation process as it unfolds in an environment like this one. Buyers and sellers must both exercise caution in their responses to the current situation. For buyers, the tendency is to immediately interpret any instability like that which followed on the heels of the S & P debt downgrade as a sign that sellers should immediately shave an additional 15% off their prices. We have no idea if that will happen (my guess is it won’t) but it certainly has not happened in the last week! That said, sellers also need to be cautious in refusing to accept offers which are within a stone’s throw of their realistic goals. Real buyers making real offers are not to be dismissed lightly.

So…realistic buyers know that it is not appropriate to make offers 20% below an asking price, but they also know they have more leverage than they did a few months ago when the market experienced its hot spring moment. April and May were a phenomenon which we will not see again for a while, with a 2007-like fervor gripping buyers. Even at the high end of the market, and in new developments, where deals continue to be made at excellent prices, there is considerably less urgency than there was two months ago. And I do not anticipate that that will change in September.

Realistic sellers, on the other hand, know that buyers are seeking location, light, and condition, and that they as sellers need to price accordingly. But they also know that for many buyers, frustrated with a search in which good properties seem few and far between, September is not likely to unleash a flood of new inventory.  So it makes sense for buyers to follow the basic rule of shopping for anything: if you see what you want, buy it! Don’t wait because you haven’t seen enough, or because you hope something better will magically appear. Chances are that sort of magic will prove to be elusive!

Our job as brokers is to make sure that buyers and sellers don’t end up like Congress: deadlocked. We do that by trying to find compromises which protect the basic aims of our principals while making concessions to make the other side feel heard and respected. In the end successful negotiations are the same, whether the product is a new home or a bill to address the nation’s financial woes. People of good faith listen to each other and extend themselves. That behavior almost always results in a successful outcome.

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