Real Estate: The waiting game

Talk to many real estate agents and you'll probably hear that the time from saying "hello" to a client (whether it be a buyer or a seller) to the time of closing a deal has become so protracted that it's difficult to anticipate a reasonable expectation of when they might close the deal, if ever. This situation is exacerbated by a large number of short sales, where it can easily take three to six months to get to settlement after a contract is signed. Couple this with the several months an agent will first spend showing a buyer houses, and that agent could spend the better part of a year working with a client, all for a payday that's often less than $5,000. For listing agents, it's no different. The listing process frequently also takes the same amount of time. In the end, many sellers become impatient and take their house off the market, hoping for better times. The result is then a complete loss to the agent of all their time and money. On a typical listing, that investment could easily exceed $10,000, not including the loss of a potential commission.

In that real estate agents don't get paid a dime until settlement takes place (all the while they're forking out significant amounts of their own time and money), the "waiting game" has forced large numbers of agents into insolvency, or the need to look for a paying job. Ask a real estate agent what is the next home they hope to sell, and a lot of them might say their own. We don't mean to cry a lot of crocodile tears for agents (many did well during the boom years), but today the reality is that real estate has become a profession where precious few can make a living.

The waiting game has not only impacted agents, it can also lead buyers and sellers to make decisions that aren't always to their benefit. Lee Iacocca, the famous auto executive, once said, "The trick is to make sure you don't die waiting for prosperity to come." In our current economic climate, it's not unreasonable to pull in your horns and sit things out until there is more visibility down the road. But in this period of transition for the real estate market, things have turned into a bit of a circular firing squad between buyers and sellers, with real estate agents standing in the middle. Buyers are waiting for prices to go down, and sellers are waiting for prices to go up. It's a slack tide sort of situation where everyone is looking for change. This condition has become more pronounced as we move into the holiday season and everyone has an extra motivation to wait until next year. So is waiting a good thing or a bad thing? It all depends on what you're waiting for. Here are a few reasons why people are putting it off.

Waiting for spring

Spring is obviously the best time to sell. Most any house looks better with the azaleas blooming than it do does snow piled on the porch. Nevertheless, a serious buyer realizes that the seasons will change and the amount of homes that sell in November and December isn't a whole lot less than you might think. The advantage for winter months is that buyers aren't just out there kicking tires; they're serious about finding a house.

Waiting for "days on the market" to disappear

For sellers, it's a common belief that a large number of days on the market works against them. As a result, sellers will take their house off the market for a period of time (it takes 90 days), so that the "days on the market" in their listing can reset to zero. In today's market, a short number of days on the market doesn't really help you. Buyers see that as someone who has yet to capitulate to current market conditions. In reality, a lot of days on the market can work to a seller's advantage by indicating a readiness to sell. Consequently, reducing the days on the market no longer gives the seller an advantage. Waiting to reduce days on the market is probably a mistake.

Waiting for government incentives

This is pretty much like waiting for triple zeros to show up on the lottery's pick three. It could happen, but who knows? The federal government just extended the first-time buyer credit and expanded the program to include people who are looking to sell a home and buy another. It's important to note that if you're reselling, the credit applies to the house you're buying. So you need to make the round trip of selling and buying if you expect to get the credit. The credit expires in April 2010. As a result, sellers who wait until spring will find themselves in a time crunch to accomplish both selling and buying before the deadline. If you want to take advantage of this credit, and you're a seller, get your house on the market now.

Waiting for interest rates

With rates below 5% for a 30-year fixed mortgage, looking to get a better deal isn't likely to happen. Historically, mortgage rates have never seen levels like this. It's all guesswork, and expecting that mortgage rates will go much lower is probably wishful thinking. The general consensus is that rates will go up, not down. If you find the house of your dreams, an eighth of a point on the interest rate probably won't make a material difference in your lifestyle or enjoyment of the home.

Waiting for price changes

Like we said, buyers are waiting for prices to go down, while sellers are equally optimistic about prices going up. When both parties are at a standoff regarding the direction of home prices, the net result is that the cost of homes probably won't move a whole lot in one direction or the other.

Waiting for the "right house"

Some buyers will endlessly look for homes, expecting to find a place that is perfect in every way. And with so many homes on the market, it's easy to do that into perpetuity. The reality is that there is no "perfect" house. Buying a home is a set of compromises. It's practically impossible to find a place that has it all - the right price, the right place and essentially everything you want in a house. We once spent six months showing a buyer almost 100 townhomes (there was hardly an ounce of difference between them), only to have her then send us an e-mail saying she decided to get a job in a different state. We know that selecting a home isn't a snap decision, but it also shouldn't be pursued lightly.

Waiting for the economy

It's understandable that when the economy is in the dumpster, people aren't in a hurry to make a big purchase, like a home. At the same time, and like Iacocca said, we could all die waiting for things to improve. Perhaps the irony is that the car company Iacocca was known for (Chrysler) is now no more. Nevertheless, the economy is another wild card that can easily change directions. The bottom line is that purchasing a home is an individual decision based on your personal lot in life. Don't let global economics hold too much sway in your decision to buy a home.

In conclusion, waiting can sometimes pay off. But the act of doing nothing is a decision in itself and can have the same ramifications as making a move. In today's real estate market, it's easy to become frozen with indecision. Just talk to your agent and realize that there's no sure thing. Like we tell most buyers or sellers, 10 years down the road it won't make an iota of difference in your life if you paid a few dollars more or got a few dollars less on your home. That all...