Wednesday, August 27, 2008 - Do Offers Reflect the House or the Market?

I've been pondering this for a day or so -- especially thinking about the hurt that sellers feel when their homes don't command the prices they feel are justified. I don't think I've worked with any sellers this year who were thrilled with the price they ultimately agreed to, but they acknowledged that the market had the biggest influence on the outcome of the negotiations.

So, what drives the offer -- the house or the market? Obviously, buyers select the house because of the house. After all, how many buyers say, "I hate this house! I think I'll buy it!"  So once they choose the house, they make their offer based on the market.

It's the market that drives the offer. That buyers look at days on market and condition may feel like it's about the house. But the fact that buyers are asking these questions at all is indicative of the overall market we're in. When the market was scorching hot, no one took the time to ask those questions, because if you waited for an answer, someone else got the house.

What other explanation is there for buyers paying thousands of dollars over asking price and appraised value than market conditions? They obviously didn't do it because they just felt like it, but because it was the only way to get the house. It was market conditions that drove buyers decisions then and market conditions that are driving buyers decisions now. Today, in our current economy, buyers are making low offers out of fear that they will have lost equity before the ink is dry on their settlement papers.

Sellers may hope that a buyer will just fall in love with their house and make an offer accordingly. And it may happen - but if that is the seller's strategy for getting the home sold, they're very likely to be disappointed.

And that's the market we're in.

(C) Susan Pruden.