Tuesday, September 25, 2007

If condos were watermelons

How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg. Abraham Lincoln

I am perplexed at the level of denial that remains in our condo market. You would think that after watching prices decline for almost 2 years that sellers would have gotten the message. I am negotiating on behalf of buyers on two different condos this week. In both cases, the sellers are clinging to the belief that their condo is somehow worth more than other recent sales in their building even when the other units were more desirable. Folks, it doesn’t matter that your neighbor sold low because he was behind on his mortgage. Nor does it matter that you need to clear X dollars or that Mr. Smith got $XXX for his unit last year or that you spent a small fortune on new granite and stainless. Mortgages are more difficult to get than just a month ago and every time a lower sale closes, your unit is worth less. It’s unfortunate, but it is what it is. If you want to sell, don’t let a qualified buyer walk away because you have an irrational need to get more than the last comparable sale.

I grew up in watermelon country and every summer, the watermelon growers would set up roadside stands selling their melons. If farmer Ed priced his at $5 each and Farmer Cletus next door priced his at $4 , Ed had to match his price or watch his melons sit unsold while losing value until they were spoiled. As long as both farmers’ melons tasted equally fine, the lower price dictated the market. In particularly productive years, prices got really low when everyone had a roadside stand with lots of inventory. I can remember 10 for $1.

The current condo market is like one of those productive years. The market is saturated with inventory and prices have retreated. Cling to the belief that you’ve got a $5 watermelon in a $3 year and you’ll continue to hold it while your neighbors who’ve responded to market conditions sell their’s. There is also the risk that, as more melons ripen, the price will drop to $2. At that point, the $3 you turned down looks good. As silly as it sounds, condos are like watermelons. Deny it if you dare.