Ignoring Buyer Expectations Could Cost You

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Buyer expectations are really just a product of overall market sentiment.  If the general consensus view of the market is positive, negative or neutral, most people who are actively in the market to buy at a given time will act accordingly.  Buyers are certainly not working together but their collective actions produce and reaffirm a herd mentality that becomes a driving force in the market.

A Recent Example Fresh in the Minds of Most

The recent collapse in real estate values from late 2006 – 2012 won’t soon be forgotten.  As property values peaked in 2006, there were signs of buyer fatigue in the market.  Bullishness may have been waning but the herd was still moving forward because recent sales data hadn’t shows signs of major weakness.   If you were a contrarian at the time and you felt the market was beginning to trend down, the only option you had was to sit out because there were still plenty of ready, willing and able buyers to fill the void.

Flash forward 18-24 months, the financial markets were in turmoil, banks curbed their appetite for lending and property values started losing ground month over month and year over year at every reporting.  Buyers were taking notice and most sellers were trying to hold on to a market that was slipping away.  This was a period when a lot of sellers still could have sold at very good prices.  By 2009, the disconnect between buyer and seller expectations was as wide as it has been in recent history and fewer and fewer deals were getting done. 

In 2010, it was clear to everyone that the real estate market was in a free fall.  Buyer sentiment had shifted 180 degrees from the peak of the market.  Active buyers in the market at the time, whether by necessity or by choice, knew prices were still declining, inventory was sky high, and competition was minimal at best.   As a buyer you would have expected to pay less than recent comparable sales.  Thus, pricing became highly subjective at this point. 

Expectations Begin To Shift Again

Toward the end of 2011 and into 2012, the market showed signs of stabilizing.  The recovery seems to be due more in part to supply and demand factors than anything else.  Fewer sellers were willing to participate while the market was bottoming and banks have limited the number of REO properties re-entering the market.  The excess inventory began to be absorbed as more and more people got comfortable with acquiring property again and investors, sensing a bottom, returned to the market en masse.

It’s interesting to note that buyer expectations did not change immediately as the market was beginning to rebound.  New buyers entering the market still wanted a “great” deal.  They expected to make low offers and move on to the next property with no hesitation if they couldn’t get their price.  As more buyers and investors continued to enter the market, the reality that market was slowly shifting set in. 

Months into a more stable market there is plenty of data that can be used to support a shift that favors sellers somewhat.  Buyers are taking notice that pricing is moving up, fewer opportunities are becoming available and competition is continuing to increase.  Sellers who know and understand buyer expectations in this revived market will be better positioned to capitalize on it.

The real estate market typically moves slowly but when a fundamental shift takes hold, you have to recognize that and position your property appropriately.  Taking the time to understand the market and the expectations of active participants will help to ensure a successful outcome when you are looking to sell.