Saturday, May 26, 2007

Are They Sure It's "A Good Time to Buy"?

We've been hearing a constant stream of propoganda from the NAR, NAHB and unscrupulous agents that it's a good time to buy. I submit it is time for them to put their money where their mouths are.

We've seen the ads in the paper and on TV and also heard them on the radio where those who benefit to profit from housing transactions are claiming it's "a good time to buy." You've seen me write about how absurd and unethical I believe their claims are, but yet the assault on our sensibilities continues. Go figure.

Clearly these salespeople must know something we don't. Maybe huge amounts of inventory, increasing defaults and foreclosures, historic credit-tightening and affordability actually don't matter and all those years of studying finance and economics have be, in fact, for naught. Apparently, these guys are on to some big secret that they aren't willing to articulate outright, but that feeds their certainty that real estate is still an excellent investment. But they aren't sharing, are they? Must be some kind of, ultra-pervasive, iron-clad non-disclosure agreement they all must have signed. It must be very frustrating to have this secret knowledge and not be able to share it with buyers.

I feel their pain. But I think I have come up with a way that they can convince us that is indeed a good time to buy; it's called a price guarantee and it works like this:

A buyer makes an offer that is accepted by the seller, the house goes through escrow and the buyer takes possession of the property. At the end of five years, the buyer is required to hire a professional appraiser who will determine the market value of the home. If the appraisal for the home comes in below the price the buyer paid, the agent/Realtor/clerk who sold the house would be required to reimburse the buyer for the difference. If the appraisal is above the sales price, the agent/Realtor/clerk who sold the house is off the hook and is under no further obligation.

Can you see the beauty of this? Realtors can now demonstrate their certitude that they believe it's a good time to buy by guaranteeing the price themselves! Now, the price guarantees would have to be collateralized in some way, preferably with some non-real estate asset; so, the NAR may have to place a few billion into a restricted use account to keep the RE clerks liquid. Of course, the clerks/NAR may want to spread the risk a little; so, maybe the could ping Lloyd's of London to see if they want to get in on the action. They're clever folks, they'll figure it out.

Now, it's going to take some time for this idea to spread, but I think if there's enough buyer demand for the program, it'll get legs. So, the next time you're looking at a house, ask the agent about a price guarantee. You will probably have to explain them, (clapping out the big words might help) but if you're patient, I am sure they will understand. Under the unlikely circumstance that they aren't willing to offer a price guarantee, ask them if they'd consider an offer of 20-25% under asking instead. It's got the same net-effect and doesn't have the burden of being a little difficult to understand.

I'm going to go try it out a couple of open houses today and encourage you to do the same.

Vivo los Osos!


sunsetbeachguy said...

I just got restarted on my ziprealty accounts and searches.

3 foreclosures already in 92648 and one of them is in the gated seacliff hoods north of goldenwest.

Just got confirmation that things are trending downwards but still wildly over-priced.

In most cases $200K-$350K compared to HB fundamentals.

Schahrzad Berkland said...

I love it!

Anonymous said...

HB Bear:
To be grammatically correct, your signoff should be:

Viva los Osos!

Markus Arelius said...

Realtors have such big mouths, the mere idea of putting money there, unfortunately, would be way too counter-intuitive.

Nevertheless, there are enough realtors in California who have only 1 to 5 years experience, and with enough braggadocio to take you up the "bet". Personally, if I were a realtor (pls. shoot me), I wouldn't gamble, because given all of the serious economic factors in play right now, things look very bad indeed. It would probably be a lot easier and less risky to just put the homeseller in a full-Nelson until they agreed to the 20-25% discount you requested. Not only because you requested it. It's actually market-appropriate.

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