January’s Realtor magazine is out, and in an article titled Overcoming Buyer Reluctance, the authors outline various arguments for convincing buyers that now is the time to buy. Among other things, they recommend the following exercise: [The comments in blue are mine.]
A simple technique to prove to potential buyers, or even sellers, that they can’t perfectly time the market is to do this easy demonstration: Take out a blank sheet of paper and pen. Now, starting at the top of the paper, draw a line going down and at the same time ask the buyers to stop you when the market has bottomed out. [I'd be worried to perform this particular part of the exercise with potential buyers myself. Clients might notice what a lot of us have noticed- that there can be a lot more downside than you anticipate.]
As long as your line keeps going straight down they won’t be able to. The moment you start back up, they’ll say "there!" but of course they missed the bottom. Now, keep drawing your line up while asking them to tell you when the market has peaked. Again, they won’t be able to tell you until you’ve rounded the top and started back down. Then they’ll say "there!" and once again they’ll be behind the peak. [Wow, if you listen to this guy, you might think that market bottoms and peaks only last a few days- then the market takes off like a shot. Why buy now then? Wait a few days for it to come back around and try again.]
This should be a moment of truth for them. Buyers cannot perfectly time a market—no one can. The smartest people know this. They play in the safe zone. The safe zone is where smart people plan to buy and sell. Anyone who buys at the top of a market is just unlucky and anyone who buys at the bottom of a market is just lucky. [Anyone who buys at the top is not paying attention. Luck might help you find the bottom, but likely as not, if you find it, you've been doing your research.]
People who buy in a buyers’ market are the smart ones. They aren’t looking for a killing because they know that’s a matter of luck, not planning. They’re looking for a sound decision with a predictable result and, therefore, ask the question: "Has the market dropped enough now to make a sensible purchase?" More often than not, when they’re asking this question, they’re already in the safe zone and the answer is yes. [A "buyers' market" is a rather arbitrary designation by the National Association of Realtors, who never use the "hold" designation. Consequently they end up encouraging their customers to make a lot of bad timing decisions. If a buyer wants to make a safe purchase, the question isn't "Has the market dropped enough?" but rather "How much farther is the market likely to fall?" It's safer to overshoot the bottom and buy on the upswing than it is to buy too soon.]
Logic says that you can’t predictably time the market to be able to buy at the absolute bottom and sell at the absolute top. [Logic says that you don't want to get your information about when to buy from someone who's telling you that timing when to buy and sell is a matter of luck.]
After their comments about timing and luck, the authors offer this astounding bit of advice:
Become their [buyers] economist of choice.
Find every way possible to overcome the media-driven real estate malaise. Be the one with the facts. Educate them that real estate is a cyclical business. All of this has happened before, and it will happen again. What goes up must come down. More important, what goes down has always come back up. Home values will most certainly continue their long-standing trend of appreciation over time. At the very least inflation will see to that. And equity buildup through mortgage debt paydown still remains a proven path to financial wealth. You will have to constantly educate and remind buyers of these economic certainties.
Smart buyers will make sure that THEY are the ones with the facts.
How about this little experiment to determine if a potential agent is any good or not. Print out this Realtor magazine article and show it to your potential agent. If they start moaning and shredding the article, they just might be alright. If they agree with the logic, you can point out to them that since timing the market is merely a matter of luck, a rabbit’s foot would be much cheaper than their commission- then run.
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Most of your sellers have to sell. No buyers have to buy. So, the logic (or illogic) does not apply.
Wow, this just keeps getting worse.
I have the January Realtor magazine but just tossed it in a heap, then I read your blog. I opened the magazine up to the article.
It’s all hype.
I get so ticked at seeing the industry representatives constantly trying to work an angle – on agents, on buyers, sellers.
This stupid magazine is for realtors that sit on their butts all day long drinking coffee, then go to a fat-butt lunch, then come back to the office for more coffee. There’s really nothing in this thing worth while.
Good agents know how to make a living in any economy; and they know how to help people make good choices, get out of jams, figure out legal documents, a school system, you name it, it’s just a service. Good agents don’t need all this trickery.
People forget that real estate is always flowing. Somebody has to do it and not all transactions can be done by the owner; boy, can an owner botch a sale. And, boy, can a buyer ruin their future trying to do it on their own.
Besides, this article is just entry-level, real estate 101 nonsense. Advanced techniques are hard to even grasp without being well versed in sales.
Lawrence Yun is an idiot. David what’s-his-face was an idiot. The NAR is a mess. The MLS is, at best, a crummy source of information.
I really get frustrated at the people and services that represent the real estate industry. They believe that people have to be tricked into participating in the industry and it’s just not true.
Oh, I just flipped the magazine closed and noticed the cover “Driving Toward Housing Recovery”, I can’t even be bothered reading it. It’s all the same. There is no recovery around any corner we can see from here.
Brought to you by the folks that helped create this mess.
“………. What goes up must come down…..
True – gravity will see to that.
“…… More important, what goes down has always come back up…….”
Unless it’s a submarine maybe.
Think about it.
Agent-
Thank you for your comments- I couldn’t agree more.
The NAR is a detriment to the industry. Their baloney hurts the reputation of all agents. It’s going to take proactive agents to change things though.
I almost didn’t post this one thinking, “Nah, we’ve established that the NAR was full of it.” I keep hoping though that enough agents are disgusted that maybe some real change can happen.
RE: January Realtor magazine
What a stupid demonstration.
There is also a description in there of the new NAR ad campaign set to begin airing in early January. I think that one of the commercials pokes fun at fence-sitters.
I was listening to the Fox News Saturday biz shows to annoy myself while doing some paperwork this morning. I enjoyed one part a little bit. Though normally a collosal blowhard, the panelist Charles Payne actually said something like he should probably not be included in the real estate segment because he has been so wrong on housing for the last two years. That was kind of nice to hear.
One constant from the realtors the past 2-3 years is it’s the media’s fault. These people are phonier than the media (that takes a lot)
I’m very pleased/happy/proud to have just sent in my nearly 400 dollars to the national assocition of realtards… Glad to know all of my money is being put to good use!
I am a professor with my background in applied mathematics/econometrics from UC Berkeley. It really warms my heart, to think every realtor with a two week approved course can become the ‘economist of choice…’ I could have skipped that grueling six years of hard work at UCB I guess, and that thesis I had to write that took almost a year!
Essentially the same article was published in the Sunday Oregonian today. Article interviewed four Portland area realtors (or brokers), and talked about ‘pent up demand’, ‘great bargains’ and how housing will be bottoming out the first half of 2009, and keep rising afterwards. They even showed a graph ‘estimating’ the rise in prices, showing a slight dip in this past year.
Absolutely outrageous, even for the real estate section.
Yossarian,
I gave my e-mail to Twist with permission to forward to you. I do not know if you received it.
Have a good year
I think they didn’t publish part of the “demonstration”:
Again, begin drawing a line down. At some point, start drawing upwards again. Your
targetclient will naturally say “now!” and call a bottom. Immediately, change direction and start drawing downwards again, and say either “dead cat bounce” or “catching a falling knife”. Then explain how the market does not move in a straight line from peak to bottom, so this exercise is a trap to catch the gullible.Surak:
Thanks, Twist did give me your email. But I just tried your email again.. here’s the error message I get… “”Technical details of permanent failure:
Google tried to deliver your message, but it was rejected by the recipient domain. We recommend contacting the other email provider for further information about the cause of this error. The error that the other server returned was: 550 550 Recipient Rejected: Account Reserved (state 14)”
I don’t know what this means, but if there’s a setting you can change, maybe that would help.
Thanks.