Open Houses and Signs of Seller Motivation?

This is not the first summer where brokers have been scheduling open houses in the middle of the week due to the assumption that people would be spending weekends away - it's been going on for several years. However, I think more of these open houses are occurring for brokers to satisfy owners that they are servicing the listing then in the actual hope of procuring a buyer. I believe they're just trying to hang on to the listings hoping that things will get better after Labor Day. I would expect a lot of Brokers are going to hammer their sellers for Price drops just before Labor Day. I know that I would be having a "Come to Jesus meeting" with any seller who's listing I had to tell them that their one chance of selling the property is people seeing a substantial reduction when they come back from Summer vacation - especially for those buyers who had seen the listing prior to the summer and were wondering why it was still on the market 3 months later.

So this level of open house activity is normal. But do they still foretend a likely flexibility on the part of the seller?

I agree about the "come to Jesus" speeches. Too much negative press about the market at this point so Sept. is perfect time to hammer home the "realities" of the market, whether perceived or not.

It seems like we see this every time, it takes some sellers a couple of years to accept new realities in a soft market.

Ximon,
As I said, I don't think it indicates flexibility on the part of the seller as much as it indicates desperation on the part of the broker to hang on to the listing. I think many sellers are probably complaining to Brokers about the lack of showings, but there isn't much that a broker can do to produce more showings if the market is slow, many fewer people are looking at apartments, and there's been no price change. In addition the Sunday New York Times Real Estate Section is no longer the Bible, so a broker can't point to placing an ad there every week to prove they're making an effort. So what clubs does a broker have in their bag to show the seller that they are trying? I think the go to move is having open houses (whether or not that actually furthers the cause of getting the unit sold). I also think it's a good set up for the eventual meeting where the broker asks the seller to reduce the price ("I had eight open houses in the past 2 months and no one is biting. We have to lower the price.")

But I also think you are going to see more open houses in any market where you have both more inventory and apartments are taking longer to sell. In 2016 I tried to set up an Open House Tour for Brokers for units in the Prime Village under $2 million. None of the Brokers with those listings were interested because they all thought their properties were going to sell any minute. My guess is that today in the same situation many more would sign on to such an endeavor, even if only to show their Seller the marketing effort being made.
So to answer your question more fully, there have been open houses during the week in the Summer time for years but it wouldn't surprise me if the level was higher this year, but also that doesn't necessarily say anything about seller flexibility, just Broker nervousness (probably exacerbated by reading the news and pressure from their sellers).

One of the reasons I was asking is that I continue to look for one bedrooms that I can trade down to when I sell my existing unit. So, I wonder if it is better to buy something before the busy season as seller may be more motivated to cut a deal. It may be that is not the case but I will at least make list of these units and then see if there are price reductions in the Fall.

Thanks 30. It seems that brokers today have fewer arrows in their quiver. Wonder why commissions remain as high as they are given the relative lack of tools available to assist sellers.

ximon, there's no arrow that will let a broker sell a $1.5 million apartment for $2 million, and the problem with a seller who thinks that there is such an arrow is that they're often the ones arguing that commission on said apartment are "too high."

Yet, sarcasm off, that can't actually be the case, because in this market, overpriced FSBOs -- which presumably offer sellers a lower commission rate than they would pay to a lowly full-service broker such as myself -- aren't moving either.

ali r.

Understood Ali. Sorry for the dig at the brokerage community. Of course a broker cannot perform miracles but it is clear that brokers are handcuffed more than in the past, in part I agree by sellers who think they know what their home is worth or worse, don't care.

I'll say I certainly don't think that it's broker's commissions standing in the way of sales - unless you believe that if every listing dropped their price 3% there would be a flood of new transactions. When markets retract brokers tend to become the red-headed step children, but if you need to shave 25% of the price to get a deal done it's not the broker standing in the way.
The irony is the when the market is booming is the time brokers should get paid less because the job is so easy (I once heard a salesperson be so enthusiastic that she told the seller "I'll probably sell it at the first open house." And all I can think was it if I was the seller I'd be wondering why I was paying such a high commission then). But Sellers are making so much money the ignore the huge selling expenses.
Then the market turns down, brokers actually have to work hard to procure sales, but since sellers are losing money the first thing they look to cut is the sa

I'll say I certainly don't think that it's broker's commissions standing in the way of sales - unless you believe that if every listing dropped their price 3% there would be a flood of new transactions. When markets retract brokers tend to become the red-headed step children, but if you need to shave 25% of the price to get a deal done it's not the broker standing in the way.
The irony is the when the market is booming is the time brokers should get paid less because the job is so easy (I once heard a salesperson be so enthusiastic that she told the seller "I'll probably sell it at the first open house." And all I could think was it if I was the seller I'd be wondering why I was paying such a high commission then). But Sellers are making so much money they ignore the huge selling expenses.
Then the market turns down, brokers actually have to work hard to procure sales, but since sellers are losing money the first thing they look to cut is the sales commission even if the broker work 4 times as hard as when they sold them the place.

^^ what 30 said. This exactly.

I didn't mean for this discussion to be about brokers but I stepped in it so I will own it.

I agree completely that brokers are often in a "damned if you do, damned if you don't position". And I see the irony in sellers complaining at the same time that brokers are working harder. Ironic also that making a quick sale at a high price is viewed as a broker not "earning" their full commission. But I assume that this all evens out in the end and is part and parcel of a broker's life?

But as I said, it seems like brokers are increasingly handcuffed in the tools available to them, in part part due to better technology and greater transparency. So what are examples of the extra work a broker might do in a soft market to see a deal achieve a satisfactory conclusion, short of cutting their commission?

Aw, Xi, all the love! The comments weren't taken personally.

But since you've pulled the soapbox over, let me answer. In co-op land (which is mostly where I work, though if anyone wants me to sell a condo, I'm happy to talk) the people who will pay the highest price for apartments are people who are stretching to get into buildings that they consider aspirational.

The seller's broker can work with the seller to create a channel to the board to essentially pre-clear those marginal candidates (or get them turned away early and discreetly, so no one feels embarrassed).

I'm working with a buyer who is a marginal candidate for a tough building. I sent over 52 pages of financials and 2 pages of comps with our opening bid. Seller's broker, heaven bless, read that, digested that, and conveyed the relevant points to her client.

The ability to compile, analyze and process information -- and to convey it with nuance and tone -- is something that top brokers have, and it gets sellers to the closing table.

ali r.

To your point of summer open houses, current market...it's dead, brokers are 'losing their minds' as one big gun whom we're currently doing a deal with noted. However, the best stuff is still selling, preparing a 'highest and best' as we speak for a 3 bedroom in a prime DT hood. I think we are seeing a classic summer slowdown, and the market will normalize post-Labor Day. I think it's a good time to be looking...

To 30's point, our listing model initially was to address the very same comment he heard 'this will sell at the first open house'. My favorite client (buy-side) comment, 'wow we had several offers after the first open house and accepted on! Jeez...I just shelled out a $125k for that'. Now we have a model that addresses that. We have had such a great experience with listing properties, we are now working with any reasonable seller.

Keith Burkhardt
The Burkhardt Group

I am working with a buyer who won't budge from her price and neither will the seller.

Here's the thing, ten year yields have gone up since early to mid July. The GDP report did not move the yield higher as Wall Street was disappointed. The jobs report comes out on Friday which can very well move yields higher if wages increase. (Or other factors) I don't think that will happen but one never knows.
Bottom line is that since yields have gone up since mid July mortgage rates have gone up, and my buyer 's DTI has gone up since her projected monthly payments have gone up, which may have an impact on board approval (maybe even bank approval) if the DTI goes up more.
I think that there are many people out there in the same situation but may not realize it.

What streetsmart just posted is what I've been claiming was going to happen for I think the last 8 months.

As far as what brokers can do, I'll say what I did in a post crash environment: since I buy property myself, I have access to a lot of investors from attending thousands of auctions, conferences, had people referred to me to buy REO (a lot from the lending institutions themselves), etc. So I had a database of buyers who were sitting and waiting till properties which met certain criteria were met. As such I had a unique ability to market certain kinds of properties because in a market where "no one was buying" I was walking around with a pocket full of buyers who were willing to pull the trigger on any property that met their buying criteria in 5 minutes (and all cash, 30 day time is of the essence closings, etc).

30 it sounds like you were dealing primarily with investors? Yes I absolutely wish I would have bought in 1992, I already had children by then that had a comfortable family home to live in.. Like many of my friends I would have held onto that home for the foreseeable future, when you own you don't move every two years especially when you're a moderate income earner.

http://www.millersamuel.com/change-is-constant-100-years-of-new-york-real-estate/

In the current market, with a slight view to its near-term future, a valuable service by brokers would be to educate not just sellers but coop boards who can often act like an immovable object facing the realities of the unstoppable force of the market.

Every coop board should have a sub-committee composed of current or former real estate professionals who can advise the board on market trends.

Ximon,
A lot of coop words are doing the exact opposite by banning real estate professionals from being on the board.

Keith,
I dealt with a lot of investors but also end-users as well who were willing to jump through the hoops of buying distressed properties (as well as owners of distressed properties looking to do workouts before banks had largely developed short sale programs).

This blog post from Warburg sums up the current market dynamics quite well, so here it is: http://www.warburgrealty.com/2018/07/up-and-down/

As someone who built a business that primarily represents buyers (untill this year), I would disagree. We do much better in a stable or 'buyers market'. In 2010 11 and 12 I would say 80% of the offers we made wound up getting to contract on what I would describe as a normal negotiation process.

Starting in 2009 our model attracted some very smart and Savvy buyers. They were not afraid to dive in when others saw doom. There were some excellent deals made, and a number of those buyers have now sold and traded up. A number of these people taught me to be Fearless.

2014 to 2015 certainly was a great time to be a listing agent. However on the buy side I would estimate that 20% of our offers made it to contract. Ultimately we still did well, but it was with a lot of stress attached and ultimately a lot of persistence.

@ximon I'm guessing though you don't agree with the last paragraph of his blog ;)

Keith, I would have more respect for his blog if he allowed comments. But he controls his positive message well.

Basically he's trying to say prices are sticky downwards. Does anyone know what he said in 2016? The reason I ask is because now he insinuates prices have been falling since 2015, but most brokers have been bending over backwards to deny this has been occuring for the past few years until a few months ago.
If anyone wants to make even money bets on whether the market will keep going down this year and not go back up next year I'm game. I'm still calling for a 35% to 50% hit off the top.

I think Warburg is just making the best of a bad situation. If he ignores the facts, he will look incompetent so he spins the negative into a positive. Why crystal ball does he have to make him think things will turn around in 2019? Of course he doesn't say. If the market gets worse next year, he will find another reason to deny it's a trend.

Better to rely on independent research like Miller or Shiller. This is the point I am trying to make. Why don't investors listen to independent analysts with little to no skin in the game?

To his everlasting credit, the person who called the top in Summer 2015 was Noah Rosenblatt (Urban Digs). This wasn't the top in all submarkets, and there were also niche events (the redrawing of catchement zones for 11 schools on the UWS comes to mind). But in general, looking in the rearview mirror, he's been spot on.

So Ali, Can you get a basic 2 bedrooom 2 bath coop in $1.5/$2mm range in UWS cheaper than 2015 based on your intuition?

Jeez 30, 35-50% haircut! I sincerely hope you are wrong!

@300, yes, but:

1) the best discounts are for non-prime condition. I currently have a buyer client looking in that range, and there are certainly estate deals aplenty to be had ... but my client has a very involved job and can't renovate. Since some of these units are sitting on the market, apparently everyone else feels the same way.
2) where in the UWS those apartments are has moved around a little, as the market has "upgraded" some neighborhoods and "downgraded" some neighborhoods based on the school reorganization. I love the entire Upper West Side, and for that reason, and for Fair Housing reasons, I'm not going to get into specifics.
3) maintenance/property taxes on those units has generally increased 5%/year or so, so if your income has been flat... they don't necessarily look like bargains.

ali r.

I think gut renos are certainly cheaper and should be cheaper (min $500 per sq ft to fully nicely finished if not more) as the reno costs have gone up due to tight labor market/Hudson yards and there is plenty of finished inventory for buyers to pick from but at a higher price point.

So UWS good condition, more or less no movement in $1.5mm-$2mm range.

Anybody else feel like it's pretty dead right now? Or is it just the time of the year

August and late December are the slowest imo

Slowest time of the year, in pretty much every industry from finance to real estate

Yes, the US is becoming like Europe. Pretty much closed down for August.

Things are picking back up again!