Read this very interesting article published in the Washington Post. It talks to both sides of the “housing bubble debate.” Who is right and who is wrong remains to be seen. I have purchased real estate for years, buying my first house about 20 years ago. I have bought and sold foreclosures, estate homes, homes to live in and haven’t lost any money yet. But, it is important to point out that this market is absolutely CRAZY.
Just this week, after working with a buyer for two months he went a bit crazy. We had made offers (substantial) on four properties. He did not get any of the contracts even though one was $25,000 over the asking price with $100,000 cash to put down. He called me yesterday, understandably upset. He wanted to know why the seller would not sell his house to him. He has problems understanding that sellers can pretty much do what they want and don’t need to give a reason. The listing agent told me she had 8 offers on the property. My client insisted that he would pay whatever he needed to in order to purchase the property. He is clearly frustrated as am I, however, he should not “pay anything” to own the property. He may have lost the property based on my advise. When writing the contract he told me to bid $500.00 over the highest offer, no matter what. I am supposed to do what my buyer or seller request of me as long as it is legal. In this case the buyer was not exactly comfortable with the english language and I was concerned that he did not know what he was saying. I suggested we stop somewhere in our offer. Am I doing a good job for my buyer if I let the sky be the limit? In a year, if that property drops 15% in value from the current market he could really get hurt. This is especially true if he pays 10% too much for the property now. I have opened him up for a potential loss of 25% or about $75,000.00. I cannot do that to a customer. At this point I may refer him to another agent. He probably feels I am the cause for him “loosing” 4 houses.
This is what is going on in parts of this Maryland market. Personally, I cannot justify allowing a buyer to damage their financial strength. I believe I should council my client to protect them, especially if I don’t think they understand the full context of the business.
Please, please be careful. I know many of you buyers are frustrated right now. Many people say this is going to continue. How can it? people’s incomes are now lagging way behind their ability to purchase a home. Many cannot afford to move. This creates a continued short supply of homes on the market and more bidding wars.
Before you tell your agent to bid anything, “just get the damn house” take a very deep,slow breath and think it through.