Before everyone figures it out-Bifurcation during Stagflation Means Negotiating

Before Covid, there was actually this mystical time where sellers weren't magically getting multiple offers and instead might contribute to the 6 months worth of inventory in what was our fairly normal market because we were hovering around our 2% inflation target. I don't necessarily see a more normalized market everywhere, but it is definitely becoming more common. 

The market appears to be very bifurcated. In my parents portfolio, we have received at least 3 letters from agents looking for our exact product in less than 6 months. That is way more letters than it has been in the past. I've talked to these agents, most of these buyers are pretty realistic. Let me first preface this by saying that this is a unique property and that appears to be defining the bifurcation of this market. In some cases unique can be translated to lot size, sometimes it's zoning, sometimes it is rent potential, etc. Another way to interpret this, if you own a property that has "some hair on it", don't expect it to sell the way that it would have 6 months ago. "Some hair on it" could mean, busy street, too small a lot, illegal units, undesirable zoning, etc. Essentially all the opposite things that could potentially sustain the value of the property.

Because of this bifurcation, there are other properties that are beginning to see price reductions. There is one property in particular that we're evaluating that could be an interesting addition to the portfolio. After talking to the listing agent, it sounds like we could get a pretty significant price reduction. The property is overpriced to begin with, but maybe I would be pleasantly surprised by what we could do. There are also a few other factors that are making this deal particularly interesting that are part of what makes real estate interesting: there is a human element. Quick side note, the sacrifice of one property for another is appealing to us because of how we assess properties. Every investor is different and has different driving factors. I personally don't believe that there is any one dogmatic system. It also enables every investor to rate themselves based on how their operating system functions. I'll go over this another time. 

The ability to be a greedy seller and a ruthless buyer simultaneously almost never happens. Take the era of COVID as an example. For a lot of people, their home reached ground breaking new prices. However, in order to get something else, they would be bidding against a volume of other people, also paying ground breaking new prices. Like I said, we are empowered to do so because of how we assess opportunities, but it is still exceptionally rare. 

More specifically, how does this affect you. Buyers, with an increase in interest rates, your purchasing power has been significantly reduced, aka you can't afford as much as you did 6 months ago. Sellers, because your buyers can't afford as much, you will end up in one of two scenarios. One, you won't have multiple offers. Two, you might need to have a price reduction. If you want to hit the market, these are some of the responses you might need to consider if you're a motivated seller. Bottom line, be prepared to reach a more normalized market unless you have a positive outlier property. Even still, don't expect multiple offers anymore as a lot of people have been shaken out of the market.