This is quite frankly the most inefficient, odd real estate market I've ever seen (can you say 2006?). Once this bizarre market gets a taste of the internet, information and efficiency, can you say watch out below?
First, they don't have an MLS - so you have to go from storefront to storefront (can you say massive overhead?) looking at photos in the windows of places for sale (can you say internet? can you say dis-inter-mediation?).
Then, they're just now getting the idea of asking for less than the asking price (can you say lowball?). Seems pretty obvious for this yank (can you say 50% off?). Thanks HP reader for the lead:
Gazundering looks set to become a bigger problem than gazumping, as homebuyers look to beat down the price they pay for properties, the organisation representing estate agents warned today.
The practice, where a buyer agrees a price for the property then lowers it at the last minute, has been on the increase in recent months, according to the National Association of Estate Agents (NAEA).
The body said increased access to information on property prices, together with a glut of properties on the market, meant buyers were now prepared to take a risk on making a lower offer.
"Buyers can take the attitude 'I don't believe the vendor is going to tell me to get lost' and if they do, there are lots more properties available," said Peter Bolton King, the NAEA's chief executive
"I've seen professional buyers make offers on two properties with the intention of buying the one that achieves the most significant reduction," he said.
"This isn't fair, it isn't moral and it shouldn't be legal."
February 09, 2006
From London: Can you say "lowball" (aka "Gazundering"): "This isn't fair, it isn't moral and it shouldn't be legal"
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4 comments:
I agree that making an offer you have no intention of honoring is a shifty practice.
Of course, sellers were fond of underpricing their homes to start a bidding war - and then pulling the listing when the only offers were at the asking price. Real Estate agents supposedly "frown" on the practice, but that hardly stopped it from happening.
So now buyers are starting to do this to the sellers. I agree it's dishonest, but it's just the other side of the same coin.
Gazumping usually refers to cases where the buyer has already outbid other paniced buyers and shills. An agreement is made to purchase the property. There may be money in escrow, but there is nothing legally binding at this point and the escrow can be fully refunded if either party backs out. Suddenly the seller decides he wants more money before he will close the sale. Gazundering is the mirror image of Gazumping. It's suddenly "unfair" now that the buyer is in the driver's seat.
Only in Scotland are there laws similar to those in the U.S., which discourage shills and gazumping.
If you ever want to hear some scary stories about what can go wrong, share a pint with anyone who knows about "endowment mortgages." These were mortgages where the principle was automagically diverted into the stock market. Their popularity a few years back coincided with the period just before the popping of the stock bubble.
Ireland shares much of the inefficiency of the U.K. property market (perhaps tenfold). It might take a few weeks for a presswood mansion to go up in the U.S. But Irish planning permission and construction can easily take several years. Some of the buildings being completed now were planned during the IT boom of 1999-2001. But there are other unique characteristics of the Irish market which make it potentially a bigger bubble.
It's a very young country where the majority of the population has never known anything but boom times. In order to keep their kids from living at home forever, many parents mortgage their own homes to subsidize the children's "first step on the property ladder." The lending banks look the other way.
Irish interest rates are based on the European Central Bank (the U.K. has a separate monetary policy and can put on the brakes, but Germany, France and other economically depressed E.U. states will not put the brakes on themselves just to slow Ireland.)
There is no annual property tax, only a huge VAT tax and stamp duty, based on the sale price. The building lobby received exemptions for newly contructed homes. The end result is, if you sell a new home the day you buy it, the buyer will have to come up with tens of thousand of euro more than you did, just to cover stamp duty. It's a perfect way of ratcheting up a market, with no smooth way to deflate.
There are several other builder friendly laws which allow many property owners to avoid paying taxes on income from property. Perhaps it is worth mentioning that the previous Taoseach
Ireland is also counting on immigation from E.U. accession states to maintain the bubble. But most of the jobs for these new immigrants are in the building industry. Banks used to be reluctant to loan to someone without a permanent visa, but I've met people without such and the lending bank never bothered to ask.
One of the Irish banks has been playing advertisements where a mafia type character encourages young buyers to get onto the property ladder. Somehow this seems appropriate.
Isn't this an illegal breach of contract? In the U.S. at least, if I'm selling my house, it's legally the buyer who makes the offer even if my ad says "offered at $500,000". Then I accept it and it's a contract.
Jeesum what a screwed up system over there.
No wonder they're having a hard time popping that bubble!
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