In The Buyer’s Advantage authors Pat Esswein, Christine Varner, Elizabeth Ody, and Jessica Anderson break the story that there is a slump in real estate that has given rise to a buyer’s market.
After dropping this bomb the authors go on to describe, with the kind of mind numbing detail normally reserved for essays by college freshmen, how sellers are being more aggressive to appeal to picky buyers. Of course you may have come to this conclusion yourself as the market stand-still of the past year and a half drained your bank account and any hope you had of making a return on your investment. In fact, you may be one of the very sellers the authors are advising to ‘suck it up’ and sell low after buying high just a year or so ago. Excited? Please curb your enthusiasm as we highlight some tips from the article.
The News Isn’t All Bad? It would come as a surprise to many homeowners and investors who have lost money, sleep, and sometimes their marriage, over the past 18 months to hear that the news out there ‘isn’t all bad.’ But according to the authors, prices continued to rise in once blazing markets like Arizona and Florida, as well as lesser known hotspots such as Idaho, Oregon, Utah, and Washington. It seems each of those markets apparently posted year-on-year price increases of 15%+ in 2006.
It also seems that buyers are coming back to take advantage of seller concessions, then staying in for the low interest rates – as low as 6.3% for a 30-year fixed-rate mortgage. The authors also say that the number of homes for sale is stabilizing though they admit that builders are still cutting prices and offering once unheard of incentives even as they try top apply the brakes and get their own financial houses in order.
Some People Just Won’t Learn. The authors tell the story of a seller in California who couldn’t move her property for months then took the advice of a savvy broker and dropped the price $50,000 based on a CMA (competitive market analysis) showing the sale price of comparable houses in the area. Once the price had been adjusted the house sold in 2 weeks. Of course the seller probably lost all the equity she had built up over the years just to make the sale, but for some reason the authors don’t mention that. But I will mention it, and I can also say from experience that sellers lose money, sleep, and sales, for a host of preventable reasons such as
- emotional attachment to their real estate
- they overpaid and have to justify it
- they bought to flip and are looking for a big payday
- they started with a manageable loan but got over-leveraged waiting out the market
- their 1-year interest-only negative amortization ARM kicked in (they now pay 17%)
There are other reasons of course, but the upshot is the same every time and it’s not good. People who adopt reasons like these are often in foreclosure not long after. Many turn to bankruptcy as a way out, only to carry the same baggage into their bankruptcy lawyer’s office. Bottom line: it’s not worth exploring your options until you are convinced that not filing for bankruptcy protection will cost you more than filing.
Appearance Is Everything. Apparently people are paying up to $3,000 to have their homes “staged” and de-cluttered in order to show well, and using services like this one to do so. Only in America. Well, mostly in California, but whatever. The authors also suggest making repairs so that an inspection by the would-be buyer won’t show anything unexpected, or even to do the inspection yourself then offer the home’s clean bill of health to prospective buyers. There are so many reasons why this makes little or no sense, that I almost won’t go into it. Long-story short, if you don’t want to make the repairs just give the right price concessions, or use a combination of the two.
Keeping Your Options Open. Not a bad idea, this one. Buyers have been using “kick out” clauses forever in order to protect them from having to buy a new property even though they haven’t sold their current one. Sellers can co-opt that same idea by saying that if they get a better offer before the buyer has firmed up their financing, etc., then all bets are off. Keep in mind though, this one could get messy.
Follow Up: So is there really hope? Is the real estate market really staging a come-back after a half-dozen false starts over the past few years? My guess is yes because, among other things, lending and title work are picking up, as are refinance transactions, while interest rates remain low. Plus, this really is a great time to be a real estate buyer. Aside from run-of-the-mill deals, savvy buyers can pick up short-sale property, foreclosures, near-foreclosures, contract purchases, wrap mortgages, and any number of other ways to get more house for less than at any time in the past 4 years. Call or e-mail us for more information and a complete rundown on strategies for both buyers and sellers.
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