Where Have All the Buyers Gone?
By Jim Hirshfield

Abridged versions of this article were published in
the Westport News, Wilton Villager, and Stamford Times during September 2006

Many homeowners who are trying to sell their homes have been asking, “Where are all the buyers?” The simple answer is that these homeowners need to look in the mirror. That is because every seller is waiting for his or her transformation into a buyer.

The typical scenario is that a seller will put their home on the market and wait for the offers to come in. However, in many cases the offers are not coming in due to the current market’s “adjustment”. And this has lead to a surplus of homes for sale and a scarcity of buyers. That is what happens in a slowdown; a logjam of buyers trapped in their current homes as sellers.

As a home seller, if you are going to “wait until the right buyer comes along”, or “wait for the market to catch up to your asking price”, then you could be waiting for a long time. Unfortunately, many sellers will make the mistake of holding out for an unrealistic price well beyond the point that it makes economic sense to do so. These sellers will be missing the opportunity to get a good deal on their next home. By waiting (and hoping) for the market to change in their favor, these sellers are forgoing the benefits of the current buyers’ market. You can’t have the best of both worlds. If you are holding out for an unrealistic sales price, then you are predicting that we will find ourselves in a sellers’ market – or at least trending in that direction. And we can’t be in both a buyers’ market and a sellers’ market at the same time.

So if your home is not selling, trust me, it has nothing to do with whether your Realtor has been effectively marketing your home. Rest assured, Realtors are competent and have plenty of motivation, especially in today’s market. Bottom line: it’s the price. You’re probably trying to sell your home for more than it is worth. But don’t blame the Realtor; many are working overtime to market their listings while they struggle to convince their clients to price their homes realistically.

Every house has a fair market value, defined as the price point at which a seller is willing to sell and a buyer is willing to buy. And these two points don’t always converge smoothly. Both parties need to be realistic. And in a buyers’ market that means that there is more pressure on sellers to be flexible on price. That is because buyers have the ability to walk away and make an offer on a comparable home. Despite the uniqueness of your home, buyers have a lot to choose from, and very little invested emotionally in any given home. Case in point: many buyers are now putting offers in on multiple homes at the same time, and in other cases, walking away from previously inked deals when sellers won’t remedy minor defects.

As a seller, you have to ask yourself whether you stand to gain more by waiting. Will you be financially better off if you sell your home one or two years from now for, say 10% more as compared to selling it today at fair market value? In other words, does it make sense to list a home currently valued at say, $1 million, for $1.1 million, and wait until next year (or beyond) to get the higher price? Or would you be better off if you sold it today for $1 million?

Before you start “running the numbers”, realize that this is exactly what many sellers are currently doing. They think their homes are worth more than they are and they stubbornly hold on to an artificially high price point. Generally most sellers are emotionally stuck on an arbitrary number and have trouble accepting a lower price. They feel as if they are losing money. But you can’t lose what you never had.

Back to the numbers. In our example, we need to consider more than just the sale of your current home. We need to consider your next real estate transaction as well.

Suppose you want to buy a new home in the $1.5 to $2 million range. If you wait out the year(s) to sell your current home for $1.1 million, you might pay close to $2 million at some point in the future for a home that you could potentially buy today for $1.5 to $1.8 million. So if you hold out too long for your sales price, you can find yourself in a situation where you are paying more than you should for your next home. Is it really worth it?

If you wait it out, you are contending with uncertainty and the prospect of gaining $100,000 more on the sale of your current home, but paying $200,000 to $500,000 more for your next home. That is a costly mistake.

On the other hand, if you sell now at the fair market value, you will get what your home is worth and you will enjoy a buyer’s discount on your next home – potentially saving big bucks.

Keep in mind that you are in the same market that everyone else is in; subject to the same buying trends and price pressures. The anxiety you are feeling as a home seller is probably the same anxiety that other sellers (one of whom you are going to buy from) are feeling. And you don’t have to be sitting on $1 million worth of real estate for this to apply to you. It holds true at any price point. In simple terms, it is highly unlikely that you will receive a sellers’ market premium on the sale of your current home and a buyers’ market discount on the purchase of your next home.

When the market turns in favor of buyers, as it recently has, your best bet is to price your home correctly and move on to buying. Start by consulting a competent real estate agent and taking their advice on the value of your home. And finally, realize that it is human nature to feel that you may have under-priced your home if a buyer is quick to accept your asking price. But the flip side to that is that buyers can feel that they are over-paying if sellers accept their offered price too willingly. In fact, this is just the principle of fair market value at work; the convergence of what a seller is willing to accept and what a buyer is willing to pay.