Blog: R.E. Tales
Hey, not every place is pretty.
The Market Doesn't Care
A decade or two ago, I spoke frequently with a family who wanted land. They were folks who had obviously never had much money, but were poised to come into quite a bit as their rent-controlled apartment was going to be razed and they were the sole holdouts. They’d been holding out for years and were the only ones left in the entire building. “A long shot”, I thought, but it turned out they ended up relatively wealthy, at least relative to where they’d started from. Mostly, my relationship was frequent phone calls and emails, very friendly ones I must say. Then they finally scheduled a visit, one which proved a disaster for me, as they arrived 30 hours late, driving up from New York City (3 hours away). It became obvious from that one showing that they had no clue about what good land is, or even on what they wanted. We drove around a neglected field and one of them got all excited over seeing a seedling pine tree (they were all over). They asked if they could have it and, upon receiving an affirmative answer, pulled it up, leaving some of the roots in the ground. Then they sat it in the back of the car where it could get full sunshine and dry out good and thoroughly on the 30 (?) hour trip back. They wanted to plant it in a window box. “That pine is doomed”, I thought, just like the day had been for me.
They never did buy from me or anyone else in the firm, though they looked with the others as well. No loyalty, despite years of friendly exchanges. Some years later, I got a message from the son, Roberto, who had always been my contact. They’d bought not one but two pieces of land and one was only a mile away from me! Not only was there a lack of loyalty, but it was a kick in the pants. My solace was that both pieces were kind of crappy land, though one held some potential. If things did not turn out well, we could not be blamed.
At long intervals, I would get a friendly note or a call from Roberto, often telling me about events in his family’s life. And he liked to hear about my family as well, though he’d never met any of them. Some folks are like that and I am alway glad to keep up the relationship. Most just want to use me and then forget me when they have no more need for my services, so it is refreshing when one wants to keep the relationship going. Some years passed and the exchanges started again. Now, he wanted to sell one of his pieces of land. We talked, and the price he quoted that he wanted was several times what the market would bear. I told him so, but Roberto insisted that was what he wanted. I wished him good luck.
Three more years passed before the next contact. He wanted to sell them both now, and of course for the same ridiculous price. He’d been half-heartedly advertising them, but had gotten nowhere, which was hardly surprising. Buyers are not fools. This began a very long email exchange. When I give long explanations, I like to make them in writing so the recipient can go back over and ponder what I have said. Through the course of the correspondence, I gave many, many long explanations on what market conditions were, why he could not expect to get anywhere near what he’d hoped for. Now, in response to my arguments, he was willing to come down - but to a figure only 3 times what each was worth. That was an improvement, I suppose, not that it would make much difference.
I was pretty frank and said, in as every way I could think of, that people would not pay anywhere near what he wanted. If he had to get that, then he had better expect to wait some years for the market to approach those figures. How long? I didn’t know, who does? A decade maybe? Perhaps longer. I even told him the best reason for me to even take the listing was to make other property look better.
Roberto’s response: well, they’d owned it all these years and paid taxes all that time, didn’t they have a right to get back their investment? ….Well, no. No one ever has a “right” to make money or even to keep from losing it. This is the United States and we embrace capitalism. No guarantees. As an aside, adding the years of taxes to their purchase price (which was not cheap, they definitely did not get any bargains when they bought, which was also at the height of a price spike), and they would still be asking for a 2-300% profit. It didn’t sink in, none of it. I was convincing only myself.
I told him that buyers don’t care what his investment is or if he made or lost money; they only care if what they buy is worth it to them. And they are definitely going to check prices on similar properties before they buy, especially in these days when all you need to do that is an internet connection. I mentioned that once in a great while a buyer, thinking he was astute, will look up what someone paid for the land they are selling. It’s public information and available to anyone who knows how to look for it. And these “astute” buyers may then complain if someone is making too much money. My response to them is that they should always focus on what anything is worth to them, not what someone else paid for it. Immediately after saying that, I follow through with this: “If the seller was losing money on it, would you up your price?” Naturally, none of them would ever do that and they then realize the foolishness of their line of reason. Or they should. Some won’t.
This sort of reasoning does not work on Roberto. I told him that every property on the market is in competition with each other and the cheapest ones sell first, nearly every time. So, if you are over-priced, the best you can hope is that the competition gets sold off and then your turn comes. But that only works if nothing new comes on the market, so it’s not of much use. He replies like a stuck record, that he deserves a return on his investment (>200%?). He has a teflon mind: my explanations and reasoning just refuse to stick.
I explain to hm why his land is not that good. One piece is flat and wet and a huge high line cuts it into. the other has a very shallow soil, especially at one end. Heck, at that end, there is no soil, zero. He says that is why he likes them - they are flat. The land was run-down decade ago when he bought it and one piece has not even been farmed since. The bushes are only more prevalent and higher now. Then he tells me of the great barn that there is on that piece. I explain that this barn is nearly 50 years old now and the town values it at only $2000. Which gives me an idea - look up assessed valuations, which I do. And lo and behold, it turns out that the Town figures (at fair market value, current prices) they are worth even less than the figures I have quoted him, which in turn are a fraction of what he wants. I let Roberto put that in his pipe and smoke it for a while.
He called back, making the same arguments. But now he is willing to capitulate some; won’t someone just make him an offer? I reply that other than professionals and certain ethnic groups, people just don’t do that. If the asking price is not close to what they want to pay, they will not bother to make an offer. (True, very true.) I finally agreed to take someone by one of them in the next couple of days, which I did. The buyer, who was ethnic, told me to not even stop but did ask a single question: why was the seller asking so much money?
A few days later, Roberto asked me what the buyer thought about the land. I told him, talking to deaf ears. Hey, Roberto, wanting something does not make it so. The market does not care what you want. Nor do buyers. So he finally agreed to ask a bit less, only 2 1/4 times its worth on a good day. The current dialog has been going on almost daily for a month now. Last night, I was up to midnight preparing listings to get signed. Let’s see if he signs them. I ‘ll bet that he will want to add my commission on top of the price he wants.
Roberto is a motivated seller too. They are in danger of losing their home to the bank. Their taxes are behind and the County could be taking any of their three properties and that has got their bank worried about their investment in the home (which is not for sale, not now). But I am not worried about them losing their home as they have lots of experience staving off institutions. They know all the tricks.
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Some blogs are designed to amuse; others can be an immense help. All are interesting.
After 40 years, I've learned a lot, & acquired unforgettable experiences. Follow these long enough and you'll eventually get the whole book. (Names probably changed, for obvious reasons.)