[Music]
Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in
Greenville South Carolina I am your host
as always Stan McCune I am a realtor here
in the Greenville area of South Carolina
and you can find all of my contact
information in the show notes if you
need to reach out to me for any of your
real estate needs and just a reminder as
always please please leave this show a
fstar rating if you're using an app that
allows you to do that such as
particularly the Apple podcast app which
the vast majority of you guys that are
listening are using that app so I know
that you can leave me a five-star review
please do that please if you can type up
a short little review that just kind
of says what you what value you get out
of the show I would appreciate that as
well and of course really the only
thing at least so far that I get out of
this show personally is real estate
business because I am a realtor so if
you need a realtor here in the
Greenville area or you know someone that
does please send them my way reach out
to me all my contact information is
there in the show notes if you need to
reach out to me for any of your real
estate needs one thing that I have
said to you guys in the past that I'm
going to reiterate is a lot of the
content for my show starts out in my
mind as a question I operate under the
assumption that if there is something
that I am interested in or a question
that I have it's probably something that
my listeners are interested in or a
question that at least some of them have
and a lot of these questions stem
from trying to piece together or or
trying to figure out some of the things
that are not reflected in the monthly
statistics that the greater Greenville
Association of Realtors releases they
released some really fantastic
information some some great data that I
pretty much go over every month with you
guys but there are some things that they
don't discuss and probably the the thing
that I wish that they had in there the
most that they don't is information on
price reductions and that is really a
big topic right now and and a major
thing that I'm interested in right now
because obviously we are seeing a lot of
price reductions and in addition to
seeing a lot of price red uctions we're
also seeing as I discussed when we went
over the monthly statistics last
month we're seeing a lot fewer offers
that are above list price and
substantially more offers and
substantially more contracts that are
below list price well what's
interesting is that the monthly
statistics that GG produces even when
it's looking at the list price to
sale price
percentage which tells us how much
lower the contract price is versus the
list price that isn't even accounting
for Price reductions because they only
look at the most recent list price so
there's just a lot of different
important aspects to the data that's out
there that is directly tied into price
reductions and I started with the
question in my mind how many price
reductions are we seeing right now and
how does that compare historically to
what we have seen in the market in the
past I just realized I haven't turned
off my phone so I'm going to turn on do
not disturb okay all right because if I
don't you guys will just be hearing
phone calls the entire time and and text
messages the entire time I'm I'm doing
this show that's my life as a realtor
all right
so here's what I did I went into the
multiple listing service MLS and I
pulled all of the sold properties from
basically May through October of
2022 then through November 21st
through November of 2021 through
April of 2022 so the six months prior to
that then may through October of 2021
the November 2020 through April 2021
and then I did the ENT entire year of
2019 now I I intentionally left off the
beginning of the pandemic because
that was just such a weird time like if
if I did that stretch from if if I
kept this consistent and did like I
said that that pandemic period of time
immediately you know may through October
of 2020 or even before that we would
just have a lot of really wonky data so
I intentionally left that out but I
wanted to do the entire year of 2019
because we can safely say that was pre
pandemic things were quote unquote
normal back then back in 2019 and so we
we need to compare to to all of that
stuff and so I took all of those
different periods of time and broke down
how I it's actually quite simple to do
this in MLS because they have the the
original list price and then the most
recent list price and then the sold
price and so I can actually see based
on what the original price was and then
what the final list price was and I
don't even for this study I didn't even
have to look at the sold price but I I
can look at how many price ructions
there were now what I didn't do is I
didn't clean up this data because
there's going to be a lot of
scenarios where realtors that don't know
what they're doing Enter listings
incorrectly into MLS example there are
there were several that I saw where
someone entered for instance
$198,000 house for $198 million and then
they had to reduce the price by you
know oodles and oodles in order to
get it back down to 98,000 I started
running some like other analysis on this
to try to like figure out different
averages and medians and whatnot and
just found that things were just getting
really out of hand because of of the
realtors that had incorrectly listed
things and added extra zeros at the end
which then bumped those listings up I
didn't basically I operated under the
assumption that that is just going to
happen and it's going to happen
regularly fairly consistently across
you know all of these different sets of
data and so I didn't scrub it free of of
all of those so that's just something to
to keep in mind but I looked at all
of these different periods of time to
see what we have been seeing in terms of
price reductions and here's what we saw
in 2019 and this is actually a higher
number than I expected in 2019
32% of listings saw a price reduction so
almost exactly a third of properties of
of homes that was what I was
specifically looking at was single
family homes that were sold had price
reductions so it again it's pretty
straightforward basically one out of
every three properties that listed on
the market at some point had to reduce
its price now obviously during the
pandemic that number went way way down
we can already see that in the
November 2020 through April 2021 data
set
because that number went all the way
down to
20.8% for that period of time in May
through October 2021 that number went
to the lowest of all of my data set that
I have here it went down to
12.86% so during the most insane time
that we have to to track here
12.86% of listings had a price reduction
at some point so a little bit more than
one out of 10 that stayed very low
for for my November 21 through April
2022 data set 15.64% of listings had a
price reduction during that period of
time and then may through October of
this year that number hopped back up to
what it was back in November 2020
through April 2021 basically 20% it was
19.88% so still much lower than 2019
right
maybe again remember I was looking I I
actually failed to mention this but I
filtered all of this by sold properties
which didn't really matter for the
properties that were you know like a
couple of years ago but for the
properties that were the past 6 months
only filtering by the sold properties
made a big difference so I decided for
that six-month period of time well let's
look at all of the actives and under
contract properties as well and for
comparison my the the number of
listings that were sold for the past six
months that I came up with from May
through October was at least for
these properties I was looking at was
8,929 the number of active and under
contract right now as of when I pulled
this data was
4,629 which by the way huge number right
not too long ago we were looking in the
low thousands at at you know
properties that were active and under
maybe not low thousands low 2000s for
actives it was low thousands if it was
active and under contract it was low
2000 so we are basically double
perhaps more than double what it was
just six months ago when it when it
comes to that that's a product of what
we've talked about inventory going way
up as fewer people are buying but still
a lot of people are selling or trying
to sell at least so what what
percentage of active and under contract
properties have had price reductions
42.7 1% of the
4,629 active and under contract
properties 42 almost
43% of them have had a price
reduction that is a massive number that
is nearly no it's greater than 10%
more than what the 2019 year had so this
is then going to be reflected in the so
data moving forward if I if I do this
exercise six months from now we will see
probably close to 50% because this
number is going to go up right because
this number accounts for there's a lot
of active properties that haven't yet
reduced their price that are going to
have to and so I suspect that if I do
this exercise 6 months from now and I
look back probably about half the the
listings half the homes on the market
will have had a price reduction that
does not even account for the number of
them that will then have to accept an
offer below what their home is listed
for massive massive implications for the
market we are seeing tons and tons of
price reductions and I predicted exactly
that earlier this year if you guys were
listening to this podcast earlier this
year I said that the market shift would
result in a lot of price reductions
because people have gotten used to being
able to overprice their home and still
get under contract relatively quickly
that Norm of being able to overprice
your home and still be able to sell it
with with either no or very few
repercussions I just did a podcast on on
that specifically I've done two podcasts
on overpricing your home the past couple
of years if you're interested listen
to them but the most recent one that I
did showed that there was a major
anomaly which was that overpricing
wasn't that big of a deal in the post
pandemic Market or you might or you
might say the pandemic real estate
market now that we are in this new phase
of the market it is returning back to
what it normally would be which is that
if you overprice your home it's going to
cause a problem and what the market is
saying and this is crazy is that 50% of
the homes out there roughly speaking are
overpriced that is a an insane number
one out of two I I'm I it's not quite
one out of two again it's it's closer to
43% but I'm I'm believing that when it's
all said and done it will be closer to
one out of two properties currently for
sale are going to have to experience
a price cut so that is if you're
selling in this market you have to be
prepared for that you have to understand
that this is the market Dynamic and
again I I predicted this that people
would get caught that they would that
they would get have gotten used to the
old Norm not realize what the new Norm
is overpriced their home and then
realize oh this is not going to work
anymore and and let me just say for a
second the reason why it worked the past
couple of years and I mentioned this on
my podcast a few weeks ago so I
apologize if if you're an avid listener
and and this is a repeat for you but
when you're in a market that's
appreciating by you know basically 2 to
4% per month which is what we
experienced in a few months in the
past couple of years we had some months
had that type of
appreciation all you had to do let's
say that you overpriced your home by 5%
all you have to do is wait it out a few
months you you might not sell it right
away again is that best practice perhaps
not you know if you're wanting to
sell quickly you still shouldn't
overprice your home but if you
overpriced your home by 5% all you had
to do is wait a few months for the
market to catch up and it would and then
all of a sudden your house is worth what
it was listed for and you know
perhaps you're happy with that now
that's that's no longer the case even
though we are seeing still those year
on-year numbers are still very high in
terms of appreciation things are cooling
down and and we are going to see those
year-on-year numbers cool down quite a
bit because people just have more
options now they have more things to
look at and so if they see a property
that's overpriced they're just like
no not going to look at it and remember
that year on-year
appreciation that we look at when I'm
looking at the monthly statist
statistics that's dealing with sold
properties that's not talking about
properties that haven't sold right and
so the people that are having to reduce
the price on their home are those are
homes that haven't sold yet so that's
not reflected in that data so when we
say that the market has appreciated by
15% well it hasn't really that's
actually I I probably need to be more
precise the market hasn't exactly
appreciated by 15% only sold home
sold for 15% more right but there's
still all of these as the active
inventory gets higher and higher and
higher there's still all of these
properties that are just sitting that
are are available and eventually once
those prices get reduced once they end
up having to sell for less than what
what it was listed for we are going to
see those year on-year numbers fall back
to reality that's that's what I think is
going to happen so
all that to say overpricing people that
overpriced their homes are are starting
to finally see the market do what it
normally does which is to tell them your
home is overpriced it's going to sit you
need to reduce the price
unfortunately it's happening to a lot
more homes for sale than we normally see
but that's the product of a shifting
Market that's the product of again
people being left out in the cold
thinking oh you know my neighbor sold
for 350 a month ago well I can sell
for I can list mine for 375 no it's it
maybe that was the case a year ago that
you could do something crazy like that
and not be penalized for it this Market
currently is penalizing you if you get
greedy I I also predicted several
months ago that people who were able to
get byy selling fixer uppers would no
longer be able to when the market
shifted and that's exactly anecdotally
this data doesn't reflect this per se
but anecdotally I'm seeing this I'm
seeing a lot of these homes that were in
desirable areas that are so let me back
up for a
second about a year ago I had several
clients that were just constantly
getting outbid in their search for homes
and I'm not just talking about one
specific client I don't have one
specific client in mind I'm just talking
generally speaking I had a lot of buyer
clients that were just getting out bid
over and over and over again
what happened when they kept getting out
bid and then of course you know they
were up against you know the ceiling of
what they could afford and all of that
we had to look at fixer upper properties
we had no other choice because all of
the other ones the the properties that
weren't fixed upper properties were just
getting the the prices were just getting
pushed up so high they were just
everyone was was putting in offers they
getting 20 25 offers it was
crazy well
that resulted as I said in us then
having to go look at fixer upper
properties and and we had no choice and
these were properties that traditionally
only investors would have been
interested in would have been looking at
but now we are seeing and it wasn't just
my clients it was I knew a lot of other
people that had the same thing they were
having retail just normal first-time
home buyer clients having to look at
fixer uppers because there was no other
option out there well then those fixer
upper properties would then end up
getting multiple offers on them because
the inventory was just so low well guess
what inventory isn't low anymore and I
predicted again that this would
happen that those people that that could
sell fixer upper properties for retail
pricing that that was going to be the
demographic that got hit the hardest
those were going to be the people that
traditionally that that was such an
anomaly we have never seen a market
where you could just list a fixer upper
proper for only a few thousand less than
a property that needed no work and still
be able to sell it that has gone away
people are not buying houses that
that need cosmetic updates they were
willing to deal with that a year ago no
longer they don't need to there are
other options on the market and so
anecdotally I've seen a ton of price
reductions on properties that are that
need cosmetic updates that need other
sorts of updates people aren't looking
at them they're not buying them they
have other options that they can work
with and so those properties now are
going to have to be priced for investors
to purchase them that's just that is
reality right now and they're you're not
going to be able to sell a fixer upper
unless it's very unique unless it has
some sort of unique appeal that people
aren't going to find a nonf fixer upper
on the market that's similar to it
unless it has that it's just going to
sit and I'm seeing homes right now in
very good parts of Greenville County and
Spartanburg County
and and Anderson County as well
and I'll throw Pickin in there CU I look
at all these different counties I'm
seeing properties in all these different
counties that a year ago would have
already sold that are just sitting right
now because they it has gross carpet
it has messed up flooring it has an ugly
kitchen all of these different things
people could deal with that last year
when it was just like we just need to
get a home we just want to lock in these
low interest rates now people are just
like nah we're we're not going to mess
around with that now we'll either
keep looking or we'll go under
contract with another house that doesn't
need so much
work so that's going to continue to
to fuel price reductions as well another
thing I'm seeing is these ey buyers
and I I did a podcast episode on the
quote unquote large investment companies
that we frequently refer to as I
buyers that you know they send out
postcards to people to say hey you're
home might be worth 300 to
$350,000 why don't you reach out to our
team of our Acquisitions team usually
what they call it why don't you reach
out to our Acquisitions team and we can
get you an exact quote today on on what
we could buy your house for we'll make
it a quick closing cash blah blah blah
blah blah
I talked about I did a podcast on
them and kind of my opinion on them a
a few months ago well I'm seeing that
a lot of these I buyers are having to
see a ton of price reductions they're
they're having homes that are just
sitting on the market we're seeing tons
of price reductions on their homes
these homes were overpriced to begin
with the work that the I buyers did to
them the the rehab was not good the I
buyers are hard to work with and they
also aren't paying buyer agent
commissions that everyone else is
paying they're not paying 3% usually
they're paying 2% in contrast to the
big home builders that know what they're
doing are now paying four to 5% buyer
agent commissions whereas these I
buyers that have that are just
purchasing these properties from people
just normal people off market and then
doing some putting some lipstick on
the pig and then listing it for 40
$50,000 more than they purchased it for
these properties are seeing price
reductions and you know I I have some
clients that could be candidates for
some of these homes and guess what I'm
not interested in showing them these
homes because I don't want to personally
work with an ey buyer now if I have a
client that is interested I'm not going
to not show them the home and I'm not
going to not put in an offer because
simply because I don't want to work with
the ey buyer that's not how I do my
business but if I have a client that is
basically relying on me to find them the
best home I am very concerned about the
work that these ey buyers do on these
properties and I'm also very concerned
about actually getting to closing with
these ey buyers because a huge
percentage of their contracts fall
through because of how difficult they
are to work with and so all that to
be said I'm seeing a ton of homes that
are on the market right now that are
just sitting and that have had multiple
price reductions that are owned by these
large investment eye buyer
companies and and what's interesting
when I pull up those homes and and then
look at what the ey buyer bought them
for in some cases the ey buyer I can
already see that they are already
underwater they have already like even
if they sold it for what it's listed for
they would lose money and you know
what I said this in my podcast when I
talked about them a few months ago I did
not think their business model was
sustainable like they raised all this
money they should just build more
inventory rather than than you know
trying to flip houses flipping houses is
not an easy thing to do and the
audacity that they thought that they
could just do it by by virtue of an
algorithm them and doing a bunch of
things remotely it just bothered me from
the get-go and you guys heard that in
that episode where I talked about them
they should have just built houses if
if they they had all of that money just
do that but anyway I I digress
they're they're going to have some
pretty bad numbers to end the year
and so they're going to have to to
answer to their investors for that
and I already mentioned that we're
seeing new home builders having to do
tons tons of price reductions right now
because they're they're getting stuck
out in the cold with all these you
know homes in these neighborhoods that
are for sale they're they're offering
all sorts of of incentives to move their
properties you know Meritage a very
big home builder in the area they were
offering Realtors 2% buyer agent
commissions a couple of months ago
they're offering 5% now that's a
massive difference in just a few months
and and you know they're they're
hoping to get in good graces with Buyer
Agents again I'm I'm not going to
give my opinion on on Meritage I'll
get in trouble if I if I do that but
let's just say as a realtor I don't
appreciate when when any sort of
homebuilder just you know does that sort
of nonsense with buyer agent
commissions all right so what does all
this mean here's here just a few
quick thoughts that I have in my head
homes that have been on the market for a
while obviously have some negotiate
negotiating potential I am thinking
about this if I am representing a buyer
and they're interested in a home that's
spent on the market I'm immediately
thinking okay what kind of negotiation
potential do we have here is it price is
it closing cost is it maybe some of the
terms I suspect we'll see a big
uptick in home sale contingencies those
basically we went away we basically have
not seen home sale contingencies for a
couple of years I think we're going to
see a big uptick in those in the next
couple of months as sellers can no
longer be choosy and we're already
seeing lower due diligence termination
fees I discussed this again I I I
hate to keep saying I discussed this in
in previous podcast but I did I I I
discussed that the the termination fee
which is what you pay if you back out
during your inspection period that's
a negotiable item and and I said during
a sellers Market it's very seller
friendly during a buyer Market it's very
buyer friendly and right now what
we're seeing is kind of we we've
definitely seen it shift away from that
sellers market number where people were
were offering insane termination fees
now we're seeing those termination fee
numbers much lower so that a a buyer if
a buyer backs out they don't have to pay
as much as they had to pay several
months ago so so that's a a major
shifting point in the market if we see
those termination fees go all the way
down to zero meaning that
generally speaking a buyer can get under
contract with the property and then back
out without owing anything that is when
we know that we are entering
something resembling if not already a
buyer
market now if I'm representing a
buyer and we're looking at at the home
at a home that's been on the market for
several weeks again I am trying to get
them as many concessions and as
favorable of terms as possible in the
past it was risky it was risky to to to
do that you know I would have clients
the past couple of years buyer clients
that would be like hey hey Stan do
you think that the seller can pay for my
closing costs and it would be like no no
absolutely you know we'd be looking at a
house that had you know already five
cars lined up on it and my client would
be interested in the house and they'd be
like do you think the seller will pay
for closing costs and the answer was no
the seller is not going to pay for your
closing cost they're going to have 15
offers on this house they're going to
accept the highest and best offer offer
and that's not going to be an offer that
has the seller paying for the buyer's
closing costs well that's different
now and so now I'm I'm I'm shifting my
Approach with the times we should be
able to get sellers to pay for
closing costs if that's what my clients
want if I'm representing a buyer we
should be able to see prices come down a
bit off of what it's listed for there's
a lot of different things again the due
diligence period how much a buyer po
potentially pays for the termination fee
that is a lot more negotiable now as
well so I'm trying to get these terms as
favorable as possible for my buyer
clients to give them the the maximum
ability to get what they want for the
cheapest number
possible of course new construction has
more negotiation potential than it has
in a long time as well as I've already
mentioned but Builders are going to
be more apt to give incentives rather
than lowering the price because think
about this
if you're looking at all the homes that
have sold in a new construction
neighborhood and you see that prices are
going down then that's bad for the
neighborhood value as a whole Builders
want to keep those sales prices as high
as possible and they'd rather give a
bunch of incentives they and and usually
what they want to do is not even so much
incentives on like closing costs but
like upgrades to the house so there's a
lot of negoti negotiating ability if
you're looking at new construction to be
a able to get some upgrades to to
the house that you couldn't have gotten
6 months ago and perhaps in addition
to that maybe have them pay closing
costs things of that nature purchase
price I I suspect that home builders
like I just said are going to try to
hold the line as much as possible on the
actual sales price it's going to be more
negotiating on some of these other
things now if I'm representing a seller
my pitch is the same as ever do not
overprice your listing you do not want
to overprice the market is Shifting but
we are also in addition to the market
shifting which is bad for sellers we're
also entering the slowest part of the
real estate season so this is also
the time of year that prices seasonally
kind of fluctuate and come down a little
bit you don't want to overprice your
listing do not do it if your home if you
list your home for sale and it lingers
on the market you have no idea what next
year is going to hold we could have a
recession coming down the road who knows
you don't want to take that risk go
ahead and list your your property list
your house for a number that is
definitely not overpricing it do not do
not overprice I can't say that enough
and and you know just be prepared if
you're a seller that if you have to
reduce the price on your
home that a that means you overpriced it
which is bad but also
it's it's it's a strange market right
now where we might look at the numbers
and determine what the price is and
think that we aren't overpricing it but
because 50% of people are having to
reduce their prices right now roughly
speaking you might find yourself in a
situation where you have to reduce it
anyway just because the market has
shifted so much that it's hard to
actually even figure out what the
correct price is in in order to to
strike that sweet spot with the market
so just keep all of these things in mind
as you look to sell your real
estate so we're seeing a lot of price
reductions and this is going to this is
a trend that's that's going to continue
and we'll continue to monitor that as
well as the other things but in the
meantime I appreciate all you guys
listening and I appreciate every single
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appreciate you guys listening and we
will talk again next time
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