Buyer’s Guide to Understanding Today’s Seller
Is the person selling the home you want a Music Facer, a Dream Chaser, or a Long-Distance Racer?
As with any high-stakes negotiation, it helps to know the type of seller with whom you’re dealing. It can make the difference between getting the home you love for a reasonable price or spending several frustrating weeks, if not more, on something that never pans out.
Even if you think you know the seller’s mentality, think again. The real estate market has changed dramatically in the past five years. Gone are the days when many sellers received multiple offers and made a 10-15 percent profit in a short amount of time; when buyers got the home of their dreams (with little, if any money down); when realtors collected a commission check without much headache.
Here are the three main types of sellers that are frequently encountered today. This list does not include those who sell foreclosed or short-sale properties; they’re a bit less predictable. Also, be aware the seller types can vary a bit by market.
The Music Facer
Having bought at the market’s peak (around 2006, depending on the market), Music Facers are now experiencing a significant life-changing event — a job transfer, a divorce, a third child — that’s forcing them to sell.
Given how much the market has declined since its peak, Music Facers accept that they will probably have to take a financial hit to move on with their lives. They’re likely to ask for the highest possible price in the beginning, because every penny counts. But they realize their home’s value is at or below the price they paid and are ultimately willing to let the market determine the value of their home. In fairly short order, then, they’ll accept a reasonable offer, knowing that they may lose part of their down payment or even have to write a check to the bank at close.
Advice to buyers: Be patient. If a Music Facer is asking too much at first, make a reasonable counter offer and see what happens. If he’s not being reasonable, he may in fact be a Dream Chaser
The Dream Chaser
Dream Chasers, like Music Facers, bought at the market’s peak. They may also be selling now because of a life event or simply the desire to move.
But unlike Music Facers, Dream Chasers are in denial. They believe their property is unique. And despite comparable sales figures showing lower prices in their neighborhood and advice from multiple realtors, they’re convinced someone will pay top dollar for their home.
Before it’s all over, Dream Chasers may fire two or three real estate agents. Their home is likely to sit on the market for a year or longer before they finally accept that it’s worth less than what they paid. This may ultimately cause Dream Chasers not to sell, if they have that option. They will have wasted a lot of peoples’ time and energy in the meantime.
Advice to buyers: Move on. You could waste months waiting for a Dream Chaser to transform into a Music Facer. In the meantime, you may miss out on a better opportunity. Your agent should be able to spot a Dream Chaser before you get too emotionally invested in the property.
The Long-Distance Racer
These are sellers who bought well before the market downturn. They understand that even though market values have declined since 2006, their home has enough equity to pay off their loan and sales costs at the closing and still make them some money. They may be disappointed knowing their property was worth a lot more at one point. But, like the Music Facer, they’re ready to move on.
Long-Distance Racers aren’t usually panicked or pressed to sell, and they’re not unrealistic about their home’s value. Typically, they price the property appropriately from the beginning.
Advice to buyers: Run, don’t walk. If a Long-Distance Racer is selling the home of your dreams, make a serious offer ASAP.
How Can You Tell?
Still not sure which type of buyer you’re dealing with?
You can get an idea by searching tax records and price history charts on Zillow. Or ask your real estate agent or the listing agent probing questions: Why is the owner selling? How long has it been on the market? What did they pay for the property and when? I’ve even seen buyers ask the listing agent if the seller is prepared to take a loss if they can’t get their asking price.
Bottom line: Buying a home is a huge investment, so get all the relevant information about your desired property as early you can. Otherwise, in a few years, you may end up becoming a Dream Chaser yourself.