“I was a RE agent in Los Angeles when the market crashed circa 1987. Here’s a brief true story of riding the market down.”

“I was a RE agent in Los Angeles when the market crashed circa 1987. I had a listing with a seller who had a well-kept home but essentially unchanged since it was built in 1962. She was a widow who had bought the house with her husband for about $50,000 new. She wanted to list for $650,000 which was about $50,000 over the comparables. I could only get her down $10,000. She was sure the house would get her asking and more.
The crash seemed to happen overnight although, of course, it had been building for a while.
A week later we got an offer for $590K. I advised taking it and got a tongue lashing from her boyfriend. He accused me of wanting to rob her of $50K.
This scenario played out several more times. Each time I managed to get her to lower her asking but never by enough. We became mutually frustrated with each other and I willingly gave up the listing.
Months later she sold her house. She got $390K. That was $200K cash she lost out on by “refusing” to sell.
How many Vancouverites afflicted with the same resistance to selling for a good margin will make the same mistake? More than don’t I wager.”

Patz at VREAA 5 July 2012 10:15pm

26 responses to ““I was a RE agent in Los Angeles when the market crashed circa 1987. Here’s a brief true story of riding the market down.”

  1. Yeah baby… Most beautiful place on earth, not making any more land, hold on sellers, every day you hold out is money in the bank. I can’t wait to see these financial geniuses ride this storm out. Many people tell me that if they live in the house for ever, it does not matter what the value is. Sheer genius. I know two people who are renting their house waiting for the value to go up, soon they will be waiting harder….

  2. It is a matter of expectation. In spite of all the media reports of dropping home sales, most home sellers are not getting it that home prices could be a lot lower a few more months or years down the road.

  3. A fun concept is how not everyone can get their desired price in an asset bubble. A massive game of musical chairs.

  4. Van east guy

    Long time owners of a property that need to sell will surely pave the the way for price reductions. Newbie owners will just sit and watch as their properties depreciate. The newbies won’t be able to sell. They will foreclose instead.

    So here’s a tip on buying if you need to buy. Buy from long time owners. They can be more flexible on price. And target homes that have been sitting on the market for a long time. And put in low ball offers so it gives less confidence to the seller. I personally think this strategy should be followed, but buying next summer. You’ll have the hammer by then!!

    • @ east van guy, this could take years to play out, better to monitor the market. The MOI will be a good gauge. More
      Room for detached home prices to go down then townhouses and condos.

    • I do agree with your advice, Van east guy, but I wonder about the long-time owners who are dependent on the sale of their home to fund their retirement. We’re watching acreages in the Fraser Valley (lots of long-time owners there) and we have noticed prices have dropped- to a point. After which, they don’t seem to budge. We’re wondering if it’s just some of the same stubborness characteristic of most buyers (“I *know* my place is worth x”), or if selling below a certain price represents a diminished quality of retirement?

      But yes, it makes sense that those who have seen the biggest gains in their property value should be most flexible on price. This logic makes it even more irritating when those sellers stay stubborn in face of a weakening market.

    • ‘Buy from long time owners. They can be more flexible on price’

      good test of that theory in my neighbourhood right now. The owner just went into a retirement home at 83 years old. She owned the house since new in the 50’s. The market is SLOW, so this is a great test on just how flexible these owners will be (her son is the decision maker). Already had INdian developers sniffing around the property and it hasn’t hit the MLS yet. The asking price is in the 900K range. Stay tuned.

      • in your case F1, i find the Buyer the more fascinating study. The East Indian Lower Mainland buyer has his own set of parameters guiding him in his quest for the holy grail of wealth and power thru RE. Study Indian during the 1960’s. You see this country’s political policy as Neutral, neither East nor West, but in action, their bias was towards the Russian model. Guess what? by the Indians own admission, it was a failure. The correct model to have followed was Western. So, what I see today is an echo of this misfortune. They will develop when they shouldn’t, and suffer long term repercussions.

        (as an aside, today the Indian government is following the Canadian model, especially in regard to multiculturalism, and health care. What is working today for India, does not translate the same way to Canada, and the reason is basic: They are incapable of appreciating the three types of demographics that run our country, French, English, and Native America)

      • “in your case F1, i find the Buyer the more fascinating study. The East Indian Lower Mainland buyer has his own set of parameters…”

        Indian developers are the potential buyers, not the buyers. I doubt they will outbid a true homeowner but I’ll keep you posted. My money is a buyer with these demographics…asian couple, 30ish, young family, luxury automobile, family money.

    • Van East guy, study the ‘market of stocks’ to appreciate ‘support and resistance’ levels. Perhaps focus on mining stocks as they have a strong following of little guy punters, much like the single property home owner gauging his own ‘support’ and ‘resistance’ levels. We see many stocks go down recently but the little guy mining analyst is holding tight waiting for better days ahead, which are at hand, they must be, surely… maybe…

      • Van east guy

        Any junior stocks out there you can tip me on? I’ve only bought CBJ and I’ve made 40% so far. Nothing else is looking good at this time.

      • VanEast Guy,
        There are better people than me, at this forum and elsewhere, who will gladly offer you their opinions on what gold miners to trade. I’m generally a bear on the ‘market of stocks’ right now. Have a look at the ratio $SPX:UVXY. This is a perfect example of 5 wave action, similar to Vancouver RE since the mid 1990’s.

        As for CBJ it looks like an Edward Jones special. You needed to be in the stock only two months out of the last 24 to get your appreciation. The rest of the time looks to be neutral or a disappointment. The danger to the ‘market of stocks’ is one of timing vs time-in-the-market.

    • I doubt it that a home owner who owns their home out right will consider low ball offers in the beginning, they usually set a “price” in their mind and will not go below that unless it becomes PAINFULLY obvious that they’re gonna lose alot of money if they dont take a lowball offer. Why??, cause accepting a lowball offer is giving the house away!!!!! Like this posting of the home owner losing $100,000 plus. They wont sell until the loss its hits them in the face like a giant cannon ball. I Read about a British couple who waited 3 YEARS to sell their Spanish vacation home because they couldnt get the price they wanted.

    • I am going to support this as well. Currently, the transactions with best prices are going through where the sellers have been long time owners with almost negligable original purchase prices. To them, it’s a windfall no matter what currently. New builders and new buyers will hold longer – but given the massive selection currently, you don’t have to buy from them.

      If you are seriously in for finding a deal, go out now and find the long term owner and low ball . . . especailly if they have been on the market with no offers for a long time.

    • Why does anyone ever HAVE TO BUY???????
      People in Europe and Asia and pretty much everywhere outside of North America / Australia, rent, most of them for their entire lives. So the argument that ONE HAS TO BUY is sheer propaganda from the Ministry of Truth (the media, the RE industry and every level of Govt. that all benefit from each RE transaction!)

  5. The roots of the 1987 market crash has its seed in the WW2 Pearl Harbor attack. Spielberg even made a film about it with a Boomer comedy ensemble, just to set the stage for when the ‘demographic echo’ would hit… 1987. Study this event, and the reaction people had, to get a feel for the ‘surprise’ of 1987, and the relatively quick recovery. (1987.7 – 1941.9 = 45.8)

    The 45 year cycle is still very much with us, I’ve mentioned it before how it relates to Canada’s big fertility rate adjustment in the years 1967/68, and what that means for boomer real estate; all these 1960’s boomers scrunched into Vancouver being set up for ‘release’ or ‘diaspora’.

  6. A request to headline on this blog from commenter specialfx3000 on VCI:
    http://vancouvercondo.info/2012/07/friday-free-for-all-211.html/page-3#comment-164450

  7. Big mistake coming up for people who see the market begin to wobble a bit then start planning to “go lowball” a seller somewhere. You can see many examples of this in the US where markets sank, a few buyers came in to “vultch” a property only to see the market sink even lower at which point a few more buyers came in and you know the drill… rinse and repeat. No telling how much you might lose with this strategy.

    • Bingo. We had two distinctive rounds of foreclosures. Original greater fools, and those who were sure they were smarter than the greater fools.

  8. Dumbest sale of the week! 3350 Thompson Cres., West Vancouver. List price $9,825,000 sold for $8,080,000. Selling agent was Clairy Yang from TRG Downtown Realty. Assessed value for land $2,600,000 + improvements $2,436,000 = total $5,036,000. One year old home. There was only 31 SFH sales in West Vancouver for the month of June, and a couple so far this month. What would make somebody pay $3 million over the assessed value at this time? The land can be replaced for $2.5 million or less, and home construction could be done for approx. $2.5 million, so you can see that the assessed value is close, but land costs are just starting to fall. The seller just won the lottery! The seller is local and knows he hit the jackpot! The seller played the game, and got it right by originally listing the property for $11,388,000, then down to $10,398,000, then down to $9,825,000. The buyer thinks that they got a bargain. I can’t believe the selling agents that come from out the area, and have no clue as to what home values should be, or know where the history tab is on MLX. In West Vancouver we are seeing a total change in real estate values as this new breed of realtors, and buyers takes over. Waterfront properties are becoming valued less than non waterfront? Appraisers would not be able to get even close to the purchase price paid for the Thompson home. I guess there are no bear blogs in China yet.

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