Too Great Expectations

They're a staple of late-night television and the bane of serious real estate agents: infomercials promising quick and easy fortunes by buying up distressed properties.

"Millions can be had for just pennies on the dollar!" they proclaim. Well, not so much.

Experts like Jim Merrion, the regional director of RE/MAX Northern Illinois, are especially wary. Merrion knows from experience that fortune rarely comes easily in this, or any, real estate market. All these commercials really do, he says, is draw thousands of novice investors with unrealistic expectations into the market, mucking up the works with their lowball offers.

"With all the talk in the media about foreclosures and the TV programs promising so much, the buyers think they have a stronger hand than they actually do," he says. "It's also created a situation where buyers are coming in afraid to bid too much, because in the back of their minds is this gnawing question: What if the market drops further? We're seeing more and more instances of people making lowball offers thinking they're going to get a great deal on a foreclosure, and then finding out later that not only is the offer not accepted, but that rates have gone up in the meantime."

Merrion says the best defenses against buyers looking for quick riches are patience and, more importantly, accurate information. Agents and brokers who take the time to inform would-be predatory buyers of the realities of the market often succeed in bringing them back down to earth.

"When buyers come in without that education, they look at a property and often don't realize what a good buy it is, and without patience they walk away after six or seven weeks."

Patience, he says, is particularly important when wading into a market significantly more complex than it was just a few years ago.

"Instead of the usual suspects, you've got REO [real estate owned] properties, foreclosures, short sales - you've got these new types of distressed properties that are creating all this inventory and are really muddying up the waters," Merrion says. "We stress to everyone - buyers, sellers and agents - that they're going to need to show a lot of patience. We've seen properties where agents say no offers will even be considered until after 14 days."
Erik Weichelt, president of Weichert Realtors Elite in San Diego, and also of the San Diego Association of Realtors, sees all the unrealistic expectations of easy fortune as underscoring the need for a good agent.

"You've got a lot of pseudo investors out there watching those late-night infomercials, but if you have a Realtor, you'll be fine," he says. "You're still going to get those lowball offers, but at least you're going to have a Realtor who can pull the comparables and prove to you what the value of your home is. If I'm representing a buyer who wants to do lowball offers, I let them know that, quite frankly, those offers have a really diminished success rate. This doesn't mean you won't be able to buy a $100,000 home at $80,000, but if you want to buy it at $20,000, your success rate is going to diminish.

"Realtors have to ask them if they have reasonable expectations," he continues. "When it comes to the seller, you have to do the same thing. You say, 'Sure, we're getting these [low] offers, but that's all part of the part of the process."

Both Merrion and Weichelt stress that the real estate market will always have its share of "unrealistically expectant" buyers in down times, and what Merrion describes as "smug sellers" in up times. Over the years, they've seen the pendulum swing several times. What's different about today's market, they say, is that the pendulum has swung so far and fast that it's created quite a bit of confusion over what constitutes a good deal.

"What's going on now is exactly the flip side of the coin for what we saw in '04 and '05, when the sellers were holding all the cards and the buyers were saying, 'Please take my offer," Merrion says. "This time, the buyers have been more aggressive than I've ever seen before."

(c) CTW Features
Copyright © CTW Features