Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in the
lovely Greenville area of South Carolina
I'm your host as always Stan McCune realtor
in the greater Greenville area and you
can find all of my contact information
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notice of that when whenever someone
does that and I and I greatly appreciate
it I am back from the dead here I
have endured a grueling last three or 4
days of a cold type of virus it's not
covid don't worry I got tested it was
negative and I've had this sickness
before for many times but I have been
through two giant boxes of tissues in
the past 4 days I'm now applying lotion
to my nose I've been clearing my
throat pretty much constantly until
today today I've I've really I'm
recording this on Tuesday March the 22nd
I'll finally feel like I'm pulling out
of this but you'll notice my voice
Probably sounds a little bit scratchy
and a little bit perhaps even deeper
than normal and that is why I am barely
even able to to record this I'll
probably have to pause a few times to
cough but you guys won't know that
because I will edit that out hopefully
I I'll will do my best at least
but I want to talk to you guys today as
I am overcoming the sickness that's
spreading
around about a statistic that I just
kind of stumbled upon that is kind of
it's actually a combination of
Statistics but it's it's an anomaly that
I have not yet seen before and I posted
about this on social media if you're
friends with me on Facebook you'll
see that's primarily where I post my
real estate takes even though I'm on
other social media platforms but I
posted about this on Facebook because I
found it very interesting and it got
some engagement and I thought you know
what this is an interesting enough
statistic that it's worth actually
discussing on the Pod and so we've
talked ad nauseright about how this
is a sell Market we all know that anyone
that is attempting to buy in this market
is seeing that there are bidding wars
everywhere you know multiple offers on
everything it's very very difficult
to get a house under contract right now
the way the market currently is if
you're a buyer well there is yet
another statistic that shows from kind
of a different
angle just the extent to which it is a
sour as Market and there there's a
lot to unpack here it's more than just
statistic which is why we're going to be
discussing it in this entire episode
but when we look at the past nine months
which have been you know really crazy
even during the winter season we had
a little bit of a seasonal slowdown but
it was still a very hot Market from a
sellers perspective again supply and
demand we talked about this a lot Supply
very low even if demand diminishes like
it does normally during the winter it's
not nearly what it needs to be in order
to offset the low Supply so the past
nine months Greenville and and when I
say Greenville this is looking at the
greater Greenville area so this is
looking at the Greenville this is based
on the Greenville MLS statistics which
sometimes gets properties in Pickins and
Anderson and Spartanburg so think about
this Loosely speaking the the green
Ville area fewer properties have gone
under contract year onye in seven of the
past 9 months in other words year
on-ear means we look at the month of
February of this year and compare it to
the month of February of last year and
then see have listings are there more
listings or are there fewer listings for
the month of February this year versus
last year so seven of the past nine
months we have had fewer properties
going under contract year on year but
but in spite of that you would expect
what would normally happen when you
have fewer properties going under
contract year onye you would expect
there would be fewer closings right that
would be the normal thing that would
happen fewer properties go under
contract therefore fewer actually sell
fewer get to
closings however in all but two of those
months we actually saw
a greater number of closings so even
though generally speaking we are seeing
fewer properties going under contract
and and by the way that you shouldn't
be alarmed by that that doesn't signal a
shift in the market like oh no fewer
people are are buying properties no
that's a direct result of there being
fewer listings on the market okay so
there's fewer properties to buy
therefore fewer properties are going
under contract but we saw in a
majority of those months more closings
year
onye how in the world can that be
accurate how can you have more closings
year
onye in several of these months when you
had fewer properties going under
contracts in those months
and and and there's a lot of
possibilities I'm not going to suggest
that I have the only possible answer
and one person who is a realtor in
new construction when I posed this
question responded that he beli because
this is the world that he's in in new
construction he believe that it might
have something to do with the fact that
new construction sales are taking longer
than they normally do right so normally
if you decide to build new construction
you go under contract you know for
the land you pick out your house you
design the house you know whatever spec
home type of a build that you want and
then they start building and then you
close you know maybe 6 months later
in a lot of communities now for really
the past year and a half it can take a
year sometimes even long
longer for from the time that they go
under contract until closing and so this
realtor
speculated that because of that that
that could be a big part of it that
whereas normally we would have seen the
new construction closings happening at
you know around six or 9 months instead
it's going closer to 12 months or more
that could be a small factor into
this I do not think it's a big factor
because a new construction closings are
a small chunk of the overall pie to
begin with B this was we're looking
at a 9 Monon sample here so you would
have thought towards the end of that
sample that we would have seen some of
those new construction closings popping
in right because this phenomenon of new
construction taking a year has been
going on for over a year now so we
should have seen some of these new
construction closings that have been
delayed should have started to pop up at
least towards the end of the sample that
I was looking at and of of course it
didn't because the the sample the nine
months that I looked at the last few
months in there fit this phenomenon
of fewer properties under contract but
more closings and then additionally
probably more importantly than any of
these things usually Builders do not end
up putting new properties that are
under contract in the MLS right normally
they have their own internal database of
what's under contract they don't enter
into the MLS until after it closes so
you don't actually get the benefit of
looking and seeing okay what is under
contract this month that month whatever
in in all these new construction
communities usually they don't do that
except for the home homes that are the
the spec homes that they've already
started building that they are then
marketing to the public those that
purchase a or or get under contract for
a lot and then build on that lot
themselves that doesn't get if if it
gets entered into the MLS at all it
doesn't usually get entered until
closing so I don't think that that is
really a big factor here here's what I
think is the factor here is my theory I
believe that the reason why fewer
properties are going under contract but
more closings are happening is because
fewer contracts are falling through than
ever before and this is again I don't
want to bore you guys with how much you
know data we can justify that it's a
sellers Market this is a very
interesting aspect of it that I think is
worth just at least considering that
more than ever if you get a property
under contract to sell it is going to
get to closing I don't have the exact
number in front of me but I know that
historically a decently large percentage
of closings did not or a decently
large percentage of contracts did not
get to closing and there's a variety
of reasons for that most often due to
buyer financing but could also be due to
condition of the property maybe the
buyer backs out who knows there's a lot
of different contingencies low appraisal
can happen all these different things
um
but over the past 9 months in particular
we have seen the trend get to the point
where it's almost a Shore done deal if
you are a seller and your house gets
under contract it is not going to fall
through it is going to get to
closing now why what what it what all is
happening there this is where I want to
just discuss and this isn't going to
take super long I'm not going to keep
you guys here but what as we think
through what exactly is the dynamic
there that's that's making it so
unlikely for a contract to fall through
as opposed to the Past well I think for
starters sellers are able to be a lot
choosier with their buyers than they
ever have ever at any other time now me
as a listing agent I represent both
buyers and sellers when I'm a listing
agent I always recommend to my sellers
to be choosy with their buyers I
always try to vet out the buyers as much
as I can there's obviously limited
information that we have sometimes
it's just paper that we can look at you
know just signatures and just have to
read between the lines of their offer
but if an offer comes in and there are
red flags about the
buyer I do not as a listing agent feel
bad about advising my seller hey there
are some red flags about this offer that
make me concerned maybe this buyer is is
barely barely able to to make this
purchase or maybe this buyer you know
isn't as in love with this property as
you would think there are a lot of
different ways to kind of read between
the lines on an offer U different ways
that a buyer that is really serious can
have a very serious offer and so even
when we're not in a seller's market I
always recommend to my sellers I'm not
the type of listing agent that just
wants to get a property under contract
right I don't want just another notch on
my belt that's the case for a lot of
people for me I want that notch on my
belt to be a closing I don't want it to
be a contract so I prioritize getting
under contract with someone that will
actually get to close closing I had a
listing a few weeks ago that was one
of those where we got multiple offers
and honestly I've had a ton of these the
past year we had several different
offers that kind of came in at different
times that after talking with my
seller I I basically talked the seller
out of accepting the offers now we
would typically counter or you know go
back and forth or do some additional
vetting on perhaps the financing or this
or that before determining that we were
not going to move forward with them or
before the other party determined that
they didn't want to move forward anymore
but that is the type of process that
a good listing agent does they make sure
that a property doesn't just get under
contract because if you get under
contract and then don't get to closing
it can be a huge waste of time and money
for everyone and it's it's not ideal and
those of you that have been through that
at some point you know exactly what I'm
talking about well right now I'm saying
that that you should do that in any
Market but right now when there are so
many multiple offer situations sellers
are able to be choosier than ever
because hey if you're looking at 20
offers then you know basically you're
going to pick out the the top two three
four of them and essentially those are
the ones that you're going to seriously
consider you're not even going to cons
consider the other 16 so here you go
you've got the top four offers okay now
let's look at
what are the what are the considerations
with these top four offers and so
what's happening is sellers are able to
and and good listing agents are able to
narrow the pool down to the most
attractive offers and the offers that
have the most likelihood of getting to
closing I've mentioned this in a
previous podcast right now over a
quarter over a fourth of our closings
are all cash right now over a fourth
that's a huge number well so you know on
average you get 20 offers on a property
five of those offers maybe even more are
going to be cash you can just kind of
assume that those are immediately
going to be the ones that sellers look
at because those have fewer
contingencies and of course
contingencies are the thing that cause a
property to be or or cause a contract to
be more likely to not get to closing and
by the way what that then means is that
as sellers are then gravitating more
towards these cash buyers those cash
buyers are often times going to be the
ones that they they have a much higher
likelihood of getting to closing anyway
so it's there's kind of this
tug and PLL going on here where sellers
are able to be more choosy and then the
buyers that are out there there's a
higher percentage of of buyers that
are less likely to fall through because
they are cash buyers they have fewer
contingencies financing and Appraisal
contingencies are probably the two
number one reasons why contracts don't
get to closing if you see a an a
contract that falls apart almost always
it's going going to be due to buyer
financing or due to a low appraisal and
so when you have a cash offer it
eliminates those contingencies Al
together really the only contingency
that might be left are related to
inspections and most of the time
inspection related problems can be
worked out by the buyer and seller so
again the dynamic sellers are able to be
choosier and then as they're being
choosier they've got this much higher
pool of very qualified cash buyers that
are almost certainly going to get to
closing available to them much higher
than has we've ever seen in the past and
so those two things combined make for
a very powerful combination that's
causing fewer contracts to fall through
another aspect of this oh I you know
I actually didn't have this written down
but this just came to mind with us
talking about the the cash
buyers basically the past two years
there have not been any home sale
contingencies out except the rare
instance of when a home that is being
purchased is has been on the market for
a while maybe it's overpriced or maybe
something weird happened that that
caused it to not go under contract at
one point or fall through or whatever
now it's been on the market for a while
and now it's languishing etc etc but
sellers part of them being choosy is
that they are not even looking at offers
if there is a home sale contingency
what's a home sale contingency if you're
new to the show or new to the idea a
home sale contingency is when you're
trying to purchase a home but in order
to purchase a home you have to sell your
home and this was a very common
contingency until Co it was very it
it definitely didn't help your offer
and you know in a multiple offer
situation you would still be unlikely to
win but it wasn't completely out of the
ordinary that someone that was selling
their home would would then be
looking to buy a home and that purchase
would be contingent on them selling
their home and so what would happen is
if then their home sale fell through
then the contract on the home that they
were buying would also just
automatically fall through and then
the they would be be able to get the
earnest money back well sometimes we'd
had these crazy cascading things where
there was one buyer was buying a
house that was contingent on the sale of
their house and that contract for the
sale of their house was also contingent
on on on another sale and so we had
this Domino of of home sale
contingencies that if one of them fell
all of them would fall and those were
the types of things that again as a
listing agent I would always try to
avoid that type of
situation but what has happened the
past two years sellers again unless
their home has been on the market for a
while they're not even thinking about
those offers I mean home a new home
comes on the market I I just I hate
it I hate it because I don't like the
market being this way but if you need to
sell your home you're stuck you you have
to sell your home and then rent or
sell your home and then ask to be able
to lease it back for a couple months or
something like that that is your the
only shot that you have in order to be
able to make that type of of
arrangement where you're able to sell
and then buy that is that has completely
changed and that even though the
percentage of contracts that had a home
sale contingency on them was is
substantially lower has always been
substantially lower than just all these
other contingencies all the other
types of contracts that have other
contingencies that contingency in
particular was always the scariest one
and the one that posed the great risk to
contracts so we basically the market has
purged those offers entirely we are not
seeing contracts fall apart due to home
sale contingencies because home sale
contingencies are gone now they're not
gone for good they will return at some
point when the market slows down but at
this moment in March 2022 they are gone
we do not see them
it is you know I might see one of them
this entire year assuming there's not
a major Market
correction so that's another big aspect
of this is and that's kind of a subo of
sellers be a being able to be more
choosy it it also is a factor in how
buyers are able are are more qualified
as well because you know a lot of them
are just moving forward and just selling
the house first or in a situation
where they maybe they have enough money
enough money in the bank that they
can purchase without selling their house
and then after they purchase then they
then they sell their house there's a lot
of different things going on here but
the net result of it all is that buyers
are more qualified there's a couple
other factors here I and I have seen
this personally again because I
represent both buyers and sellers
buyers are it's it's taking so much
effort to go under contract I mean
you're having to put offers if you're a
buyer right now you're having to put
offers on so many properties before you
get
one buyers are having to be more serious
than ever and come to grips with the
fact that they might not be able to find
another house if they you know in the
past right if you got a house under
contract you might then the next week
see another house that's like oo wow I
like that one even more maybe I should
just try to get out of this contract and
and try to put an offer on that
one that is no longer the case why
because whereas you know back a few
years ago you could reasonably expect a
house to come on the market and it
wouldn't sell for a week or two if you
made a full priced offer right away you
would get it that's no longer the case
anymore now you if you make an offer 30
$40,000 above what it's listed for you
might still get out Bid And so buyers
are having to come to terms with the
fact that they if they back out of a
contract they might
be basically homeless in a few months I
mean depending on what the situation is
if they have a if they have a lease
coming up that you know they have a
deadline for if they have other
deadlines that have to be met whatever
the case case may be they are having to
get very serious with the fact that if
they have a house under contract good
for them stick with it get to closing
even if you think you see other things
coming on the market that you might like
more you probably won't be able to get
them even if you run into issues with
this house unless those are major issues
that are irreversible and that you
simply can't live with you know
things for instance an irreversible
thing you might not be able to live with
would be you know termite damage is
found not just in the cross space but
all the way up into the walls
threatening the entire Tech
structural Integrity of the house
those are kind of the only things at
this point that you can feel good
about backing out because there is no
guarantee that you will be able to
quickly get back under contract with
another house it's G to take
you in my experience for people that are
looking you know at the below
$350,000 price point it's taking roughly
four to five offers before they finally
get one accepted
and you know some there's a lot of
factors behind that some of that is they
get more aggressive as the offers go
along they realize that I'm not just
crying wolf I'm not just saying hey
you've got to go
$30,000 above what it's listed for in
order to have a shot at it a lot of
people don't they don't want to hear
that the first go around and so you know
they'll just go $10,000 above or
they'll you know they'll they'll wave
this contingency kind of sort of even
though I'm saying you probably need to
do a little bit more than that I
never want to be too pushy people
sometimes have to learn it themselves
and so that's usually what happens
usually as people as buyers that are
looking keep getting out bid they get a
little bit more aggressive and so
usually by the fourth or fifth offer
we're able to get something accepted
after that once you get under
contract you and having gone through
all that having looked at 10 15 houses
having put offers on homes that you had
your hopes up for and kept getting out
bid for
you have a dose of reality and you
realize I not only do I not want to do
this again I don't you know I don't know
that I have another 10 15 showings and
four to five offers left in me not
I'm not saying that as as a buyer agent
I'm saying a lot of buyers they get that
buyer fatigue after a while and so I
think that that's a big factor in this
is that whereas buyers in the past
they might get something under contract
and then find a way to weasel themselves
out of it they're being a lot more
serious now and of course part of this
too is that sellers are able to demand
more seller friendly contracts maybe
with non-refundable earnest money etc
etc and as a result of that that
gives buyers more skin to the game which
is my next and really last Point here
is that buyers are having to have
more skin in the game and having to wave
more
contingencies and and potentially put
themselves in a situation where they
have to Forfeit earnest money or
perhaps have termination fees or
things like that and as a result of all
of that again they've got more skin
in the game they are less likely to back
out and to lose that earnest money
they've got something to to consider man
if I back out I now have to pay to the
seller
$3,000 you know for a lot of people
that might only have 15 $20,000 in the
bank that's a lot of money that you have
just exposed yourself to so buyers
are having to put themselves in a
situation where they're having to wave
those contingencies having to be very
serious about the house and and know
that it's a house that that they
legitimately want that they are willing
to wave those contingencies for and then
you know when those inspection reports
come back whereas in the past maybe they
would again find a way to we weasle
themselves out or maybe you know
maybe not have as much earnest money
forfeited now it's costing them
something to back out and so they're not
willing to do that so all of these
things put together
make for this fascinating Dynamic that
we have fewer listings coming on the
market than we did a year ago but more
closings happening and sorry I got to
rephrase that that was not the correct
thing we are having fewer listings
coming on the market but more
importantly we're having fewer
properties going under
contract and despite fewer properties is
going under contract more
closings that's the reason all of this
episode is a reason that I believe that
that is happening now before I let you
guys go I will warn because somebody is
going to pull this you know six or nine
months from now and say wow Stan was way
behind the times I'm going to warn
that the market may be shifting we are
seeing mortgage
rates go crazy right now I I did an
episode where I talked about this not
that long ago only a few months ago and
we've talked about it a few different
times I did not and and nobody
anticipated mortgage rates being as high
as they are now at this point they
are at where they are at this point in
the year where most economists and
people that that understand the stuff a
lot better than I do most of them did
not think this would happen until the
second half of this year I do not
know what that's going to
do the the conventional logic
conventional reasoning excuse me you
heard me choke there for a second
conventional reasoning conventional
logic would say that that should hurt
demand a little bit which if it hurts
demand a little bit that should cause
the market to ever so slightly slow down
I don't think it's going to hurt
demand a lot in other words I don't see
this being the type of thing that's
going to cause the entire Market to
shift now there are some indicators in
the economy that a recession could be
coming if that happens and it will
happen eventually let's just be honest
we we have cyclical
recessions because we can't you know
our government and our economy always
does stupid things and there has to be a
market correction at some point it will
happen at some point and that's
what's going to be required to really
really cause a dramatic shift remember
I've gotten this question a few times
you know mostly from people that are
first-time home buyers and
whatnot do you see prices going down
anytime soon no no no no no listen
prices are not going down let's be
completely Frank about this that's not
how this works the only way that we
would see quote unquote prices go down
is if a recession happened and people
started to foreclose on their homes and
then those foreclosures hit the market
that is what causes prices to go down
it's it's primarily driven by
foreclosures and short sales those take
sometimes years to cycle through the
system and we're having record low
numbers of foreclosures and short sales
right now so even if a recession
happened tomorrow right we woke up
tomorrow and we're in you know the the
Great Depression something like that
somehow that that happened maybe a crazy
nuclear Holocaust apocalypse type of
thing happens
that would obviously be very bad
nobody want nobody wants that but it
it would still take even after that a
very long time for foreclosures to
actually start to hit the
market and that is the primary thing
that that drives prices down when a
market correction happens
so understand what may be shifting when
I when I talk about that when I talk in
those terms I'm not talking about things
suddenly prices suddenly dropping what
we're talking about is fewer bidding
wars what we're talking about is home
staying on the market instead of two
days maybe two weeks or maybe two months
things like that that would be and
and honestly if that happens I've said
this before that would be a healthy
thing in a lot of ways right right now I
don't think the market is particularly
healthy being as crazy of a sell's
market as it is it would be healthy if
it shifted a little bit it would be
better if the shift happened because
because we had more Supply but
unfortunately that's not happening
anytime soon it's going to have to
happen because of of lower demand so
we will see
TBD whether the sellers Market
sustains on this level through the
entirety of of 2022 I think at least a
partial
slowdown is coming but I I anticipate
it will still be probably very much a
sellers Market not just this year but in
future years barring a recession simply
because of how low Supply is in
comparison to demand and so it would
take a tremendous drop roughly 75% drop
in demand for us to be able to to catch
up to how low the the supply is not
happening anytime soon and so for now
we can probably expect the trend to
continue of low numbers of properties
going under contract because there are
low numbers of listings but higher
numbers of closings happening and
that for the time being greatly benefit
sellers thank you guys for listening
this went longer than I thought it would
be but I hope you guys enjoyed it I
appreciate all of you I'd appreciate
even more if you could leave a five-star
rating just hit literally it takes a
click of a button to hit five stars on
your podcast app it takes about 10
seconds to write a short little review
I'd appreciate that and as you guys know
all my contact information is in the
show notes do not get the sickness that
I got but if you do go to Costco or
Sam's Club and buy one of those giant
things of of tissues kleenexes
whatever trust me you won't regret it
all right I appreciate you guys
listening and I hope you have a great
rest of the week and stay healthy
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