Residential Realities September 2011
September 19, 2011: The Waiting Game--Transaction Pace Slows to a Crawl
The Way it Was…
Remember the halcyon days of 2005, when buyers would agree to just about anything? All cash contracts, multiple over-bids, limited access to apartments, absurd signing deadlines and uncooperative sponsors...vaguely familiar? Well, here we are at late 2011, and to a great extent, that’s all ancient history.
Disappearing Deal Energy
Those of us in the real estate social media vortex, the Twitterheads and Facebook “friends” , the linkers of LinkedIn and subscribers to whatever is coming next across the digital discourse divide, know one thing: the enthusiasm for buying and selling real estate, at least on the part of buyers and sellers, is diminishing to a point of non-existence. The parties themselves now view the process as more akin to going to the dentist for an uncomfortable procedure. It’s something that needs to be done, but it’s not fun and not looked forward to.
The Way It Is…
Yes, we’ve entered the age of the reluctant and skeptical buyer. Everything must be verified and then verified again. The days of “check the box” due diligence are long gone, with buyers now demanding extensive inquisitions before signing the contract. In the old days, there would come a point when a buyer would eventually take the “leap of faith” that everything would work out, particularly since the value of the apartment would be higher down the road than it was at the time of purchase. With buyers required to look to five-year holds and ten-year holds to get to a safe place, a leap of faith is no longer realistic or sensible.
A Samuel Beckett Timetable
So deals move along a languorous glide path, with the broker’s spitball pitch of “other offers out there” having literally no impact on the buyer’s interest in signing the contract. The buyer signs, when the buyer signs. The landscape has changed, and most sellers, happy to have a buyer, wait patiently for the written promise and coveted check. Real estate has morphed from Glengarry to Godot. So go ahead, ask again, is it signed yet?
September 8, 2011: Summer of Our Discontent--Real Estate Chills Out...
Summer of Our Discontent
Anyone that doesn’t think there is a lot going on, is living in a parallel universe similar to the one in “The Truman Show”. From natural disasters to political farce, a dead calm economy and the zombie nation of unemployed, the public is punch drunk, not knowing where they are and where to turn.
Grinding it Out
It is in this context of hyper uncertainty, that real estate deals do and don’t get done. Brokers who swim well in the social media pool have a better shot at cranking out transactions, others who you might call “old school”, not so much. The only constant seems to be a changing real estate environment that mirrors the stock market. Every day is different, unpredictable and difficult. There are very few lay-ups, with most deals being three pointers from way outside the paint.
This summer, the reality of tighter lending guidelines kicked in big time. Whatever wiggle room existed for loan professionals to assist the borrower with satisfying loan conditions evaporated probably forever, or at least for many years to come. Once the loan commitment letter materializes, the conditions must be scrutinized for possible problems that can delay or derail a deal. Lawyers and brokers well know that getting a loan “cleared to close” is a gauntlet not easily crossed. Pre-contract due diligence about the buyer’s financial wherewithal, the condition of the apartment, as well as the economic health of the co-op or condo where the apartment is located, is now mandatory and not just a good idea.
A Time to Re-Adjust Expectations
Buyers and sellers entering into real estate transactions at this moment, must accept the fact that getting to the finish line requires a higher level of cooperation from both sides. Unreasonable demands about closing dates, financing contingencies or the lack thereof, unrealistic pricing, or other contractualized insanity, will only delay the end game or create unsolvable impediments to closing. Notwithstanding our “all about me” culture, more than ever, buyers and sellers must work together to solve the transactional problems that will inevitably arise in the world we live in today. Pivoting to “it’s all about them” might actually help get deals done. And that’s what we all want, isn’t it?