Wednesday, May 23, 2007

Analysis Paralysis

Thanks to Colleen K for inspiring me to continue on her topic but to elaborate enough to make a blog instead of just continue the  thread.

Analysis Paralysis - I know ALL About this especially now that there is so much information!  My wife claims that my business partner and I are two peas in pod (no pun w/my last name) because we're always checkign and double checking and -SHOPPING THINGS TO DEATH.  We've been known to wait on a purchase because heavens forbid we buy this week and miss a sale on the same thing next week. 

I'm only like that on meaningless items which is all the more frustrating for my wife.  Her engagement ring took me no time at all - I designed it after picking the perfect stone.  My car - she didn't even believe it when I a) negotiated the deal I got and b) actually came home in it.  But my laser printer took forever to buy!!

Consumers are constantly bombarded with good and BAD advice.  I believe as professionals it is our duty to help them also learn when to STOP overinforming themselves!!

Paradigm Paralysis - This is the other problem we're seeing and on the other side of the table. Paradigm Paralysis is the epitome of in the box thinking.  You can't see and adapt to change because you're stuck in your status quo.  I said YOUR status quo... Paradigm Paralysis is what helps you get left behind by the market.

The Sellers in South Florida seem to have Paradigm Paralysis.  Sellers take so long to actually decide to sell their homes, they forget that the market changed and believe it is worth what it was last year.  You never see the opposite - when the market is appreciating sellers appreciate their views and prices, but when the prices decline, Sellers don't react and so their homes sit on the market.

The problem gets worse when they finally do get a buyer and an appraiser comes in with a real value and it is lower than contract price!  Appraisers know that lenders will lend on the lower of the sales price or the appraised value and they also know that lenders have internal reviews of most all appraisals. Because of this they have to be careful ... first movers syndrome is not favorable for most!  Meaning - it takes a sale with buyers that are maybe willing to bring extra cash to the table to get the first comp that will bring prices up in an area. 

Sellers don't realize that most BUYERS won't become first movers!  Most buyers know that a low appraisal is leverage!

Which brings me back to my post that Colleen quoted from - Opportunity Cost... the opportunity cost of NOT reducing the house is - more mortgage payments, the inability to move to a new property, possibly having two mortgages simultaneously, getting stale on the market... and Realtors - that means MORE MARKETING COSTS!!!  Sellers hate when their agents come back with a contract and say that it is the best they're going to get when they already sold them on a higher price in the listing contract - that's the Paradigm Paralysis of Sellers.  Now the Realtor needs to explain the opportunity cost!! 

And the opportunity costs are higher for everyone in a market where so many buyers have analysis paralysis and the sellers have paradigm paralysis!!!

It is up to us professionals is to make sure we're not victims of either paralysis... we can only do this by being as dynamic as possible!


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David A. Podgursky, MBA
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