Is Recession really over?

Is Recession really over?

Just in case you were wondering how hot the real estate market is in San Jose, we just received a Cash offer for $320,000 on one of our Bank-Owned (REO) properties that we just listed 3 hours ago for $275,500.  I know Goldman Sachs and other Wall Street bankers have made tons of money during the current recovery, but is the recession of 2008 really over?

Why would someone write a cash offer for a property in Alum Rock area of San Jose and offer more than what the bank is asking?


The only conclusion I can draw is that it’s price.   There has been plenty of theoretical justification for buyer’s use of “Psychological Reference Point” in Merchandising Research.  It points to this Reference Price as a internal standard against an “Observed Price” in marketing to consumers.  Bottom line is that Retailers use the SALEs gimmicks to move out inventory where the consumers spend a lot more money without regard to “Quality” when the merchandise is priced well below our internal standard.  Have you ever taken home a shirt from the Clearance Rack, knowing full well that you will never wear it because it has a SALE sign on it?

Have you ever paid too much for something only because it was on Sale? And believe me, pricing properties lower than everyone expectations really works.  It generates tons of interest. And precisely because people are seeing prices well below their “reference point”, we believe they over spend.   Could it be that my bankers are taking a page from Retailers and are marketing properties the same way Retailers conduct Sales?

We are seeing quite an interesting trend where our valuations are cut when we price REO properties for sale.  One industry observer was stating that the FED has asked the banks to keep the property prices low, to avoid the creation of another Real Estate bubble.   We think it’s having an opposite affect. For this reason alone, your home could be worth more than what you think.


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