February 2010
Community Paper
copyright ©2010 by Community Paper College Park, Inc. All rights reserved.

I Fought the Market…
by Mike Derenthal, Derenthal Realty Group and College Park resident

An article ran in this week’s Economist entitled “Carrots Dressed as Sticks” and it discussed the concept of how people often value things differently once they already possess them.

An excerpt from the article:

People are contrary creatures. A man may say he would not pay more than $5 for a coffee mug. But if he is told that the mug is his, and asked immediately afterwards how much he would be willing to sell it for, he typically holds out for more. Possession it appears, lends things an added allure.

I love that last line.

I have many conversations with well-intentioned folks who tell me something to the effect of, “Mike - we’re ready to sell our house and buy something else so that we can take advantage of this great buyer’s market. We know we can pick up something for a steal – but we’re not going to just give our house away either.”

This is often a fleeting mentality, depending almost entirely on someone’s real motivation behind their move. Sometimes a sellers’ motivations are obvious, sometimes they are not. And it is often the case that the sellers themselves do not truly understand their own motivations.

If someone is selling their home just to take advantage of current market conditions (with the intention of buying something on the cheap once their house sells for a premium), they will almost always end up pulling their house off the market once they realize (“surprisingly!”) that all the other buyers out there are also looking to find the best deal possible.

It is not unusual for someone to portray the above scenario when they initially approach me about selling their home, only to realize later that something else beyond a profit incentive is what’s driving the desire to move.

I’ve found it to be good practice to truly understand people’s motivations behind their move before taking them on as clients. Often times I have to dig a bit. In many cases, the sellers themselves are not really aware of what is motivating them to make a move.

My experience is that if someone has other motivations for the move (and most people do), they will eventually come to terms with the market. If I wanted to put it to music, I would borrow heavily (if not shamelessly) from that old Bobby Fuller tune: “I fought the law, and the law won.”

The evolution in seller mentality usually plays out like this:
Stage 1: Because my house is SO AWESOME, I’m going to defy the rest of the market, and find that perfect buyer who just loves my house as much as I do. We should be able to get what we want for our place and then go out and get a steal of a deal on a bigger house so my wife and I can start a family.

Stage 2: I’ve got over $25,000 invested in this place since we bought it. Those granite countertops are ONE OF A KIND. And do you have any idea what this new roof is worth? It doesn’t even leak anymore! But none of the buyers who have come through to this point seem to appreciate what we’re selling. I’m going to tell my emotional wife to try to relax about the move. Once we sell this place we’ll find a motivated seller and buy low.

Stage 3: I owe $250,000 on this house that I bought in ’03 and want to clear another $100,000 when I sell it, but my real estate agent just doesn’t seem to understand. I’m going to tell my pregnant wife to chill out. Besides, I’ve been reading some books on landlording, and if we can’t get our price, we’ll just rent it out for enough to cover the mortgage until the market recovers next year. That way we can go out and find a great deal on a bank-owned property right now.

Stage 4. I love my wife and value my marriage. And because we really do need more space now that the triplets are just a few weeks away, I’m ready to do what it takes to get this place sold so we can move on. My realtor tells me that interest rates are expected to keep pushing back up and all those “free” government incentives are due to stop in April. And the combined effects of the recession, a slow job market, and steadily decreasing housing inventory probably make this a great time for our family to buy our next home. We might not get what we wanted for this place, but the same will probably be said by the sellers of the next one we purchase. All in all, it works out.

I fought the market, and the… market won.

I fought the market, and the… market won.

Feel free to drop me an email at mike@derenthalrealty.com.

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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