Revisiting real estate bargains

Last week’s column on shopping for real estate bargains brought a variety of comments and questions. I guess that’s not surprising, since we now have a combination of bargain prices and low interest rates. Here are some of the best responses.

Q. You said that the majority of sellers are simply testing the water and are not really motivated to sell. If that is true, why do they go to the trouble of listing their home with an agent in the first place?

A. Because they are, in fact, willing to sell, provided they get a premium price. Unfortunately, this market is rarely providing that premium. By premium price, I mean a price even higher than what this property might have sold for a couple of years ago. That was when mortgage money was flowing like water and purchasers were having to bid against each other in order to obtain a contract. Many owners heard about some of those sales in their neighborhood, and they are now comparing their home to what little they know about the one that sold then. They naturally arrive at the very logical conclusion that their home is worth considerably more, then price it accordingly.

But why would an agent accept a listing of an obviously overpriced home? Isn’t that a complete waste of time and money?

It’s true that agents today are expected to spend substantial sums of money on a marketing program. But a smart agent can minimize their actual cash outlay by focusing on less expensive but flashier advertising and by talking about the hundreds of thousands of Internet views their firm’s Web site receives each month. In addition, many real estate agents today are not particularly busy and one surefire way of getting some business is to take some listings, regardless of the asking price. There are two reasons this works. First, you are likely to get some calls off the sign and some visitors to your open house. These may be good prospects for a purchase, and there is nothing more valuable today than a motivated, qualified purchaser. Second, an agent never knows when a lukewarm seller may turn into a highly motivated seller. It is not unusual for one spouse to be unenthusiastic until he sees the other spouse fall in love with the new residence. Then the entire motivation game changes and the agent can likely make a sale.

You specifically mentioned “empty nesters,” that group of owners who have owned their homes for many years, probably raised a family there, and now are alone in a big house with just two residents. Since they are likely well qualified to purchase, why wouldn’t they want to make a move now?

The senior market is different from the overall residential market, because seniors have different concerns and needs. For starters, most owners who live in a house for an extended period of time establish deep roots in their community, and it’s just plain hard to sever those ties. In many cases, it seems that the older you get, the harder it is to make a significant change, and moving is a significant change! Next, health considerations become a major factor to many seniors contemplating a move. They want to stay near their physician and their preferred clinic or hospital, and the availability of nearby support services can become a major issue as well. As owners get older, they begin to think about the possible need for assisted living and may want to stay in close proximity to family and friends. Finally, there is the motivation issue we talked about last week. My experience is that seniors typically consider moving in response to a major life event. That may be as minor as a tumble in the backyard or as major as the passing of a spouse. It usually takes some triggering event to spur an empty nester to move.

If I am shopping for a bargain today, how do I know that same property won’t be available for less in the future? Isn’t today’s buyer taking a big risk buying now, especially with the bailout still in the works?

According to the Federal Housing Finance Agency, average home prices in Georgia have seen an overall decline of less than 1 percent in the year ended Sept. 30, 2008. No one can predict the future, but I have seen no fundamental shift in the attitude of the American public toward real estate. To the contrary, if prices are largely a function of supply and demand, we are ill-equipped to meet the housing needs of an additional 2.3 million residents that the Atlanta Regional Commission predicts will arrive here in the next 25 years.

John Adams is a broker and investor. For more real estate information or to make a comment, visit Money 99. Find previous articles by John Adams and more home buying advice on the ajchomefinder mortgage center.