By: Mark Pruner
We have a hot market in Greenwich, but every week, my clients and many other homeowners are on the receiving end of buying strategies that are doomed to failure. So right after we take a look at October market MTD, I’ll review some strategies that aren’t likely to work.
October Update
Our market in October is going where no man, woman, downsizer or young family has gone before. With a couple days to go, we have already sold 84 houses this compares to our 10-year average of 41 houses. October 2020 sales will be more than double our average sales for this month.
Last week we had 58 transaction; sales and contracts. This keeps up a 4 month trend of averaging around 60 transactions a week or a dozen transactions every workday. This pace is particularly amazing given that we only have 463 houses on the market. Provided we continue to get listings, November should also be much better than average as the market is showing few signs of slowing down.
As to October, cross your fingers, as we need 16 more sales to get to triple digit sales for the third month in a row. With October almost done we have 663 sales YTD. You have to go back to 2015 to find a year that had more sales for the whole year. We blew through 600 sales last month and will exceed 700 sales next month. I can be pretty sure of that because we have 179 sales waiting to close. Add 179 contracts to 663 sales and you get 842 transactions. What looked like a pipedream in February, breaking 800 sales for the year, is now likely.
Could we possibly break 900 sales in the year? In a normal year no way as sales drop heavily as cold weather sets in and people travel for the holidays. We’ve had a mild fall and this year for Thanksgiving Libby and her mother will be the three people at our Thanksgiving table rather than 20 – 30 folks. Add in increasing Covid cases pushing people to look for more space and a sellers taken advantage of our market with late year listings and …. well I won’t jinx it.
How Not to Buy a House in Greenwich
As mentioned we have 842 sales and contracts so far this week, but every week buyers, some experienced, most not crash and burn in their efforts to buy a house, so lets look at how these folks fail to get the house they want.
Low Balling the Opening Bid – Some people are sure that if they make enough lowball bids that eventually somebody will be desperate enough to actually accept their bed. The problem with lowball bidding is that in Greenwich, the seller, the majority of the time, won’t even respond to the bid. This leaves the buyer with two bad choices; he can bid against himself and raise his bid or walk away from a house that had he opened with a more reasonable bid he had a good chance of buying.
The average list price to sales price ratio and Greenwich is around 93% and has stayed fairly constant. Making a bid that is only 75% of list price is a waste of time. The one exception is high-end and particularly, the ultra-high end. In those rarefied airs the 93% ratio of sales price to original list price gets much lower.
Focusing on Foreclosures – Foreclosures are another popular way not to buy a house in Greenwich. Some people have to have the best bargain (read lowest price possible) and see a foreclosure as being the answer. The problem in Greenwich is that there are very few foreclosures that are actually foreclosed. Connecticut is one of the most homeowner-friendly states when it comes to foreclosing on a property. The process often takes two years or more. In those two plus years you are likely to multiple foreclosure auction notices appear in the newspaper. In Greenwich, like most of the rest of Greenwich, they are usually canceled and most of the properties never actually go to foreclosure.
This year it was even tougher for the foreclosure seeker as the courts were closed for months and foreclosure proceedings were stayed due to Covid.
Even if an auction actually happens, the buyer needs to realize that he or she is bidding against professionals who know all the ins and outs. Now if you are looking to meet an interesting group of people you will find them at a foreclosures. If you are really looking to buy an investment property via foreclosure, you’re going to have a lot more success where foreclosures happen more often, in the larger cities of Connecticut.
Lower-Priced, Brand New Houses – Another unsuccessful strategy is to focus only on brand-new houses. Of our 663 single-family home sales this year only 12 were built this year. Of those 12 new spec houses, only one was under $2 million. It’s very unlikely you’re going to find a new house for under $2M in Greenwich. If you do want new for less than $2M, then consider buying a teardown and building.
Taking a Vacation – Another surprising way that buyers end up not buying a house in Greenwich is by taking a vacation in the middle of negotiation. This is happening less this year, but people still want to get away.
You would think if someone was going to be spending a lot of money on a house and they’re in serious negotiations that that’s not the ideal time to go camping. Almost every year however I get involved in a situation where we end up waiting for a client to get to somewhere in the wilderness where they can get a cell signal. I’ve emailed documents to cruise ships, remote tropical islands and countries you have to google to find where they are.
Being out of town isn’t the deal killer that it was even five years ago but if you’re in a competitive bidding situation being unavailable during an entire afternoon visiting your recluse uncle or golfing at a club that doesn’t allow cell phones or expecting uninterrupted sleep in a time zone 12 hours ahead of Greenwich means there’s a good chance that you’ll lose the deal.
No Money Down – There is a book out there about how to buy real estate with no money down and even to get the bank or the homeowner to pay for the improvements. You don’t see buyer trying this very often in Greenwich and I have never seen it work. The one time you can do this is if you are veteran who qualifies for the VA’s 100% mortgage.
In Your Face Negotiating – We get buyers from all over the world and all types of businesses. Some are used to a rough-and-tumble style, usually fails in Greenwich. Unless the seller is also part of that world the odds are that the seller will just take a pass on negotiating. (I did once see two NYC building contractors screaming at each other on a conference call even to the point of threatening to have each other’s building permits for NYC projects cancelled. They ultimately decided not to do the deal but did go out to dinner together with their wives, all of whom were friends.)
Insulting the Seller – Nine out of 10 times insulting the seller is the kiss of death. I have seen sellers take substantially less just so they can keep that “jerk” from getting the house. And, it doesn’t have to be a direct insult, showing up late at meetings, not doing what you say you are going to do, inappropriate jokes, or even mispronouncing the owner’s name can hurt or kill a deal.
In Zillow We Trust – Another way that a buyer can kill a deal before it’s even started is by trusting some of the estimates that the big real estate websites such as Zillow generate. Greenwich has very few tract houses and a variety of housing styles, topography, ages, and floorplans. In addition, our square footage may or may not include the basement or attic space so the “size” of the house can vary a great deal even if the houses have the same floorplan. Trying to estimate price in Greenwich via a computer model leads to some really bad price estimates.
The problem is that some buyers believe these estimates and let them control their house hunting and bidding. Some buyers won’t go see a house where the Zestimate says the house is “over-priced” even though it is in their price range. Sometimes they don’t even tell their agent that’s why they rejected a house. Zestimates can also screw up bidding, as buyers refuse to bid over the Zestimate. It’s no way to buy a house.
How to Buy a House in Greenwich – In reality all of these things come down to doing your own research, being prepared, focusing on areas with good prospects, and acting respectfully to the seller. Alternatively, you can have a good agent who will tell you what is likely to work and will definitely not work. Also, there are times to break these rules. Sometimes sellers just won’t budge and stepping back from negotiations can get them to step forward. Just make sure you have cell service where you are going when you decide to break the rules.
