Housing Market Games- Lessons Learned

I want to start a little series on house hunting in the current California market. There is something rotten in the state of Real-estate. I will use my story as an example.

The sad truth about today's housing market is that it is as corrupt as ever. As a prospective first time buyer I sense something is deeply amiss. Allow me a couple of anecdotes.

I live in one of the most expensive parts of California. And for years, middle class buyers were locked out of this market, in part by design. There was ample opportunity for affordable housing, but none of it came to pass because local developers and property owners were greedy. They want stock low to keep prices high. Not much has changed, just hat the greed has gone a little deeper.

Back in March I placed a bid on a bank owned property. The house had been listed in January for $345K. On March 21st, they dropped the list price to $279K. Four days later, I offered the asking price and was told that they had 4 offers on the property, one over the asking price. So I gave a last and best offer of $285K. I was "Outbid". However, was I? The reason I was given was that they other people had a bigger down payment. Therefore, the highest bidder is not necessarily the "winner"., nor is the guy who is most likely to close. Lesson 1 learned. The property is still on the market by the way, but in escrow. We will see what happens there.

The second lesson from this experience is that seller's agents, in an attempt to generate offers, are listing homes for a "bargain", but then generating little mini-auctions. Because of the pent-up demand, they can get slighly higher prices this way. Clever, good for the banks, but ethical? Oh, what am I thinking. . . if ethical were part of the equation, much of this crisis wouldn't have happened.

Recently, I became mildly interested in a second property. This one was listed as a short sale (meaning the bank is willing to take less than the asking price) for $299K. It needed quite a bit of work. So I offered $250K. My realtor talked to the seller's agent who couldn't offer much information about the property because "she had so many, she didn't know which one that was." But she did say no offers had been made on the property. We offered $250K the same day. However, suddenly, at the same time, a second offer came in. We were outbid. We were told that the other people offered more money. Humm . . . an obscure house suddenly generates so much interest? Coincidence? Part of me doubts it. I hear this story too often.

My realtor has had clients who made as many as 22 offers and were outbid every time. Somewhere, there is collusion to keep prices high. And perhaps things aren't as distressed and we think. I think people in the biz here are loath to let a house go for under $300K. I have friends who have been looking for a year and a half and not been able to land a home after making several offers. Yet we are hearing how banks want to unload all these homes at all costs, but the reality seems to be different.

And no one does a thing to clean these places up. I am not talking about spending money, but something as simple as picking up the trash in the yard would improve the street appeal. In one yard, I found a dead dog, unburied. My realtor tells me that banks have no idea that their agents aren't doing their jobs in this regard and I am surprised the neighbors aren't squawking. Having a crappy looking yard doesn't help them either. But then, many of them are probably so underwater that they could care less.

People are still flipping houses as well. One house went for sale at $273K. Then three months later, was resold for $293K with improvements made.

This is what needs to change. 1) Houses should be sold for the list price. This is how we purchase everything from cars to groceries. The price on the tag is what you pay. 2) The amount of all bids should be disclosed. In what other auction environment do you NOT know the highest bid?

There is no transparency in the housing market, and there is tons of abuse. My search continues, but I am finding that it as slippery as college admission. When you aren't accepted, you have no real idea why. From time to time, I will post an update.