Q&A: Paul Cooper, auctioneer
Paul R. Cooper, a real estate agent and vice president at Alex Cooper Auctioneers Inc. in Towson, said his philosophy is straightforward: Only take on clients with realistic price expectations.
Here's what he had to say when we chatted last week.
Q. So how many potential clients are you turning down?
A lot. ... They can't sell. They owe too much. There's nothing they can do. ... Most people don't have any equity in the properties. They acquired them in the last two, three years.
What's successful are the estate sales — somebody passed away. They have equity.
Q. How do sellers respond if you say they need to lower their price?
Here's what he had to say when we chatted last week.
Q. So how many potential clients are you turning down?
A lot. ... They can't sell. They owe too much. There's nothing they can do. ... Most people don't have any equity in the properties. They acquired them in the last two, three years.
What's successful are the estate sales — somebody passed away. They have equity.
Q. How do sellers respond if you say they need to lower their price?
"Yeah, but I'd be giving it away." I say, "Do you want to sit or do you want to sell?"
Q. They have a reason for the amounts they want, right? Perhaps the asking prices of other homes?
That kills me, that totally kills me. "I see someone else listing their property" — well, do you need to make the same mistake? ...
People may not agree with me — they may not want to sell their house at that value. ... Many people opt to just hold. And that's, by the way, the reason you see active listings decline from 20,000 to about 18,000. ... Basically people just backed out of the marketplace. People said, "If this is all I can get for my real estate, I'm not selling."
But I'm shocked many times when people call me up and say, "The house has been listed for two years." ... You have to basically give them a reality check.
Q. What's your take on the housing market overall?
Prices are still too high, and as a result, sales volume is decreasing in the Baltimore metro area. There are some pockets, certain neighborhoods, where property values are holding up very well and supply and demand is in equilibrium, but a lot of areas that aren't. ...
Certain price ranges are doing better — lower prices, say $200 to $350. ... But once you get into what I call "jumboland," which requires jumbo mortgages, oh, it falls off big time.
Q. What's the selling plan for the clients you do take on?
Our strategy now is to multiple-list concurrent to marketing for auction.
Q. How many homes sell before auction?
A large majority.
Q. Give me a few examples of your pricing philosophy at work.
I just listed something for $199 in Ridgely's Delight. Well, the competition's in the low $200 range. I got a contract in a week.
I listed something over in Coldspring Newtown at $199 — really no competition, because it was one of the more modern townhomes over there. I got an offer in a week.
The point is, if the price ranges are $165 to $200, why list it for $175? I've had these discussions with many home sellers. Someone calls me up and says, "I'm looking for $329." [I say], "Not a house exceeded $300. Not a house. Why do you deserve $329? And why list it for $329?"
There was a house out Liberty Road, a little Cape Cod — it was only 1,200 square feet — and they had it listed for $205, and it's been listed for over 400 days. [When they approached me] I said, "Do you realize there's a 1,500-square-foot house that sold for $205? ... Here's some 1,200-square-foot homes: $150 to $175."
You have to understand what is selling and the price range. You have to understand what your competition is. Just because five other people are asking $225 for a similar house doesn't make it worth $225. It depends on what's selling.
You have to price the property correctly. ... And that's what I don't see happening in this marketplace. ... People are not adjusting their values quick enough to keep up.
Q. What about foreclosures?
I had 14 properties I did [Wednesday] that were investor-owned. We sold those at the Baltimore City courthouse, and we sold all 14. So there's buyers out there.
Q. What will it take to get more buyers to buy?
I think we need to be back to 2003 prices. ... Look at the October '04 stats, and you'll find ... median prices went up 25 percent. It's huge. ... You can't go up 25 percent in one year. It just doesn't make any sense. So that affected a lot of stuff. ...
Really, real estate should only increase at the cost of living. What, 3 percent? ...
What we have is a train that stopped. If we only have 1,071 sales [in a month], I can't sell my house so I can't buy a house. ... You've got to get the train moving, and the only way to get the train moving is by lowering the prices. Otherwise you're stuck in the station.
Q. What's your takeaway advice for homeowners who want to sell?
Some people are a step behind on the marketplace: ... The market drops to $195, you drop to $205. The market drops to $185, you drop to $195. ... You need to be one step below.
Q. They have a reason for the amounts they want, right? Perhaps the asking prices of other homes?
That kills me, that totally kills me. "I see someone else listing their property" — well, do you need to make the same mistake? ...
People may not agree with me — they may not want to sell their house at that value. ... Many people opt to just hold. And that's, by the way, the reason you see active listings decline from 20,000 to about 18,000. ... Basically people just backed out of the marketplace. People said, "If this is all I can get for my real estate, I'm not selling."
But I'm shocked many times when people call me up and say, "The house has been listed for two years." ... You have to basically give them a reality check.
Q. What's your take on the housing market overall?
Prices are still too high, and as a result, sales volume is decreasing in the Baltimore metro area. There are some pockets, certain neighborhoods, where property values are holding up very well and supply and demand is in equilibrium, but a lot of areas that aren't. ...
Certain price ranges are doing better — lower prices, say $200 to $350. ... But once you get into what I call "jumboland," which requires jumbo mortgages, oh, it falls off big time.
Q. What's the selling plan for the clients you do take on?
Our strategy now is to multiple-list concurrent to marketing for auction.
Q. How many homes sell before auction?
A large majority.
Q. Give me a few examples of your pricing philosophy at work.
I just listed something for $199 in Ridgely's Delight. Well, the competition's in the low $200 range. I got a contract in a week.
I listed something over in Coldspring Newtown at $199 — really no competition, because it was one of the more modern townhomes over there. I got an offer in a week.
The point is, if the price ranges are $165 to $200, why list it for $175? I've had these discussions with many home sellers. Someone calls me up and says, "I'm looking for $329." [I say], "Not a house exceeded $300. Not a house. Why do you deserve $329? And why list it for $329?"
There was a house out Liberty Road, a little Cape Cod — it was only 1,200 square feet — and they had it listed for $205, and it's been listed for over 400 days. [When they approached me] I said, "Do you realize there's a 1,500-square-foot house that sold for $205? ... Here's some 1,200-square-foot homes: $150 to $175."
You have to understand what is selling and the price range. You have to understand what your competition is. Just because five other people are asking $225 for a similar house doesn't make it worth $225. It depends on what's selling.
You have to price the property correctly. ... And that's what I don't see happening in this marketplace. ... People are not adjusting their values quick enough to keep up.
Q. What about foreclosures?
I had 14 properties I did [Wednesday] that were investor-owned. We sold those at the Baltimore City courthouse, and we sold all 14. So there's buyers out there.
Q. What will it take to get more buyers to buy?
I think we need to be back to 2003 prices. ... Look at the October '04 stats, and you'll find ... median prices went up 25 percent. It's huge. ... You can't go up 25 percent in one year. It just doesn't make any sense. So that affected a lot of stuff. ...
Really, real estate should only increase at the cost of living. What, 3 percent? ...
What we have is a train that stopped. If we only have 1,071 sales [in a month], I can't sell my house so I can't buy a house. ... You've got to get the train moving, and the only way to get the train moving is by lowering the prices. Otherwise you're stuck in the station.
Q. What's your takeaway advice for homeowners who want to sell?
Some people are a step behind on the marketplace: ... The market drops to $195, you drop to $205. The market drops to $185, you drop to $195. ... You need to be one step below.
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Comments
Like a lot of people in the business these days, Cooper says that sellers are reluctant to price their houses at market value. But what isn't clear to me, after reading this interview, or the article in the March 1st Baltimore Sun, is what makes this area different from other parts of the country, where housing prices are coming down more rapidly. BRAC doesn't seem to explain it, as the parts of the state that would seem most likely to benefit from BRAC are not distinguishable in terms of price, so far as I can tell, from the parts of the state that are not likely to benefit from BRAC. I am eager to enter the market to buy, but I'm looking at the ratios between rents and prices, and between incomes and prices, and it looks as if this area has more of a correction in store. I can and will wait, but I'm curious about why I have to. Is it something in the water? Are Maryland sellers just different somehow?
Posted by: Michele | March 17, 2009 6:47 PM
Jamie,
Great Interview!
@ Michele, snobby entitlement is the answer to your question. A lot of people around here (not everyone) suck of the governments proverbial nipple either through handouts or federal government jobs. Many of these leeches feel entitled. I'm waiting with you and will continue to wait for a few more years or as long as it takes. I'm waiting for 2001 prices (adjusted for inflation) but for the mean time, I'm enjoying renting a new home for 50% of the ownership cost and putting the savings in the bank!
Best,
Kevin
http://bubblemore.blogspot.com
Posted by: Kevin | March 17, 2009 8:21 PM
Michele and Kevin, I completely agree. I'm really surprised housing prices haven't fallen further or faster in this area. I'll just have to keep commuting from PA and waiting to buy until reality sets in. Btw, I also hope to see more activity at Bubblemore if possible.
I find this whole auction interview rather interesting. A property I've been watching as a barometer of a neighborhood has had an offer rejected, went to auction 3 or 4 times without any buyers able to meet what the bank wants, and now it's listed again with "quick response" yet the people buying appear to be left hanging again. It seems there are a lot of things listed, but very little that's actually for sale unless it's been beaten up badly.
Posted by: BigDragon | March 17, 2009 8:59 PM
Kevin - You are so smart! You always know everything! Too bad you didn't know when to buy a house! Now it is too late for you! Us sellers are in the driver seat again! Have you noticed the stock market advancing? New Home construction up? People getting mortgage re-works to stay in their homes. I am going to buy a Canton rowhouse for $199,000 tomorrow and sell it to you for $400,000 in three years!
Posted by: DAN TRUMP | March 17, 2009 10:01 PM
I disagree a bit with Kevin and others. I think the reason prices haven't come down much here is that 1) they were severely undervalued before the boom and 2) MD is in a much better position economically due to the federal gov't and other factors. Prices in Baltimore are still dirt cheap when compared to DC and its suburbs. Yes, certain areas went up too fast and can't sell and were overvalued, but many areas are still a relative bargain. I think prices will continue to decline slightly and then stabilize. So Kevin, enjoy renting and use that money on something besides a house...
Posted by: JDS | March 18, 2009 9:47 AM
Jamie-
Thanks so much for this. We are selling (prepping now) and listening to an auctioneer gives some nice color against the typical realtor perspective.
Our strategy is to totally capitulate to the market and be the best value in the price range.
We looked at every house in each of the nearby "price decades" and chose the one where our house stands out from the rest.
It's not pretty, but it beats sitting on the market for a year, as have our neighbors. And we are probably not gonna make any friends in the local comps department, either.
We'll know how our strategy worked soon enough, hopefully.
Posted by: David Hobby | March 18, 2009 10:04 AM
Thanks, everyone, for the comments. David, I'll be interested to hear how it goes for you -- keep us posted? (And good luck with your move.)
Posted by: Jamie Smith Hopkins | March 18, 2009 10:15 AM
JDS you are incorrect. The Baltimore metro is actually the most overpriced in the country. Bethesda is a better market when adjusted for incomes.
http://www.realestateconsulting.com/Intelligence.aspx?quicklaunch=true®ion=local
Also last week this article Jamie helped with points out that 11% of Marylanders are behind.
http://www.baltimoresun.com/business/bal-bz.mortgages06mar06,0,1586789.story
This is not all PG country.
Since last Oct many of the job losses have been 100k plus salary jobs in financial services in the area. Many of these jobs are not coming back. Many of them are women who were the second income in a house purchased for 600k. They are not going to go pick up a shovel and make 100k. The pain is just coming around here.
People are living on credit cards at the moment.
The fact of the matter is that we will have 2 bottoms. First bottom will be in new housing starts.
The second one, which will follow a year or two later will be sales of existing homes.
The low end >160k will bottom before the top. The high end 400k and above will continue to come down for years to come. Only morons pay 400k for a 20yr old townhouse even in Ellicott City when in 2002 you could by a 4bed colonial for that.
Overall Paul is correct and realistic.
If you want to sell now it's got to be a 2004 price. This is about chasing the market down and finding a knife catcher to take your house.
Ultimately we probably will get down to 2000 prices(adjusted for inflation) because simply incomes have not gone up much. This was all fueled by easy credit. In a world where downpayments are needed cash is king. Most people even those in higher income brackets have no savings. Saving 60k for a 300k mortgage is not easy for someone who makes 100k. It takes sacrifice something people are not used to doing. Sure you can put down less but then you have to pay PMI and that deduction phases out about 75k AGI.
When you look 90% the listings out in the MLS today its people who bought from 2004-2008 and want the flip money they think they are entitled too.
The problem is that the only houses that sell and sell quick are people who bought before that.
Paul is doing the honest thing and not taking a listing if they are hopeless. It's the right thing to do.
The baby boomers who have lost 50% of there retirement money are going to be selling in big numbers over the next couple years and will below away the comps. All you have to do and look at the demographics to see that the only house worth buying now is one in probate.
People need to understand they are chained to the home so they might as well get used to it and make the best of it.
Posted by: Adam | March 18, 2009 11:51 AM
@Adam,
Thanks for the great post. I checked the link you posted and it shows Baltimore with a Housing Cycle Barometer of 6.0!
Areas of Affordability Concern (5.0 to 7.5)
2 Baltimore, MD 6.0 $238,316 $47,663 $63,464 75% $12,380 20% 30%
Baltimore is the second HIGHEST on the list for Areas of Affordability Concern (5.0 to 7.5) behind Olympia, WA. I just don't get it.
Posted by: Scott | March 18, 2009 7:45 PM
Hello Kevin and other like minded individuals. I would hardly call it snobby entitlement when someone wants to sell their property for at least what is owed on it.
Posted by: Donald G. Wilson | March 18, 2009 8:10 PM
Adam, great post and links!
Don, where I come from they call that losing a bet, passing off responsibility to someone else, or being unable to admit a mistake. Snobby entitlement might not be the best way to put it unless you're describing a realtor, but the underlying purpose for saying such a thing is the same. Sure, people would like to get their money back, but at this point it should be absolutely crystal clear that the market has burnt these people. Life isn't fair. Markets go up and down. The correction hasn't really hit yet, but it will in a matter of months when the big federal employers in the area get their budgets cut, and all the formerly AAA borrowers start defaulting.
It's disappointing how eager everyone was to ride the train of perpetual unsustainable increases in real estate prices while stomping all over those people like myself who were priced right out of the market. Now that the tables have turned those same people are doing everything they can to stay on the fantasy train as it derails. Karma.
Posted by: BigDragon | March 18, 2009 11:50 PM
Speaking of auctions, check out some of the addresses mentioned in this story:
http://www.citypaper.com/digest.asp?id=17736
Posted by: Kathy | March 19, 2009 9:46 AM
Thanks for the link, Kathy -- those are some high-powered property owners on the city tax-sale list.
Posted by: Jamie Smith Hopkins | March 19, 2009 11:27 AM
Hello BigDragon,
Thank you for your well written reply.
Posted by: Donald G. Wilson | March 19, 2009 4:21 PM
Jamie,
Great interview and also great posts by Michele, Kevin, BigDig and Adam. In this case, the truth is so obvious that properties are still overvalued. I wish that the sellers would realize this and reduce their prices to mininmize the waiting time for the buyers and the suffering for themselves (continued decrease in property value while paying taxes and utilities).
Posted by: James | March 23, 2009 1:20 PM