Hang on it’s getting exciting!

by Mario Acosta on March 18, 2013

in Buyers, First-Time Home Buyers, How To Price Your Home, Investors, Short-Sale

 

The real estate market can feel a lot like a roller coaster these days.  Sometimes its going full speed others – like now – you feel like you are stuck at the top and its not moving and you can’t decide if that’s a good or bad thing.

Over the past year the real estate marketplace has changed.  It is a new place for both buyer and seller alike.  It’s not that it is better or worse, but it is different.  It is today’s reality and offers opportunities, and challenges in equal parts for both the buyer and seller.
Right now there is an artificially created lack of inventory.  This has led to a feeding frenzy among buyers, who are competing for the few new listings that show up on the market. The banks and Fannie Mae continue to release their closely held shadow inventory of foreclosures at a snail’s pace, which may be stabilizing real estate prices, but it also is extending how long it will be until foreclosures no longer represent the lion’s share of the listings.

Until (and unless) prices and values increase another 15% to 20%, homeowners who are underwater on their mortgages will still be unable to list their homes for sale. Even with such an increase many homeowners are still not in a profitable selling position. In the meantime, we keep seeing a slow drip of new listings, and Realtors are rushing their customers out to see each property the day it’s listed. Houses are selling within just a few days and often with multiple offers that are above the list price.

For home owners with equity offering a standard sale this is a great time to reap the turnaround in the market.  With fewer standard sales on the market they are in a strong selling position in a house hungry market.  A sale that can be accepted and move directly into escrow without an extended period of waiting time for the bank’s decision can be a real edge in today’s short sale and ever delayed market.

I have seen offers on three different short sale homes for three different customers — over the span of one week – go nowhere.  In each case there were multiple offers on the respective properties, and even after “highest and best” secondary bids – the homes went to other buyers.  Everyone is understandably disappointed.  But almost in every case a losing bid is followed by finding a better property.  With the experience gained, usually a winning offer is the norm.  Often properties resurface as the winning bidder backs out or hits a snag.  So it’s not really over, well… in some cases until the deed is filed.

So with all of this in mind let me offer a few strategies to buyer and seller alike.

Selling your home in today’s market is a great opportunity.  Find a great and trusted Real Estate Professional on your side and prep your home and do your homework.  Take great pictures; see my earlier blogs about prepping your home for sale, and ask top dollar.  Easier to accept a lower offer, than leave money on the table.  BE PATIENT.  Buyers may go after the deals at first until they realize how difficult and time consuming a short sale is.  Your home will look better with each passing day.

Buyers?  You need a broader strategy.  I have written about the process and what you can expect.  But here are a few pointers:
— If you can purchase a home with cash, do so.  It makes your offer stronger than those who have to get financed.  With a cash offer, there is no risk of a loan being denied, and a quick closing saves the seller money on insurance, taxes, utilities and maintenance.  If you don’t want to tie up your funds for a long period of time, speak with a mortgage loan officer about re-financing the home into a mortgage after six months of ownership.  Your interest rate could be a bit higher and you will have a few more closing costs than had you financed it upon purchase.  However, the money you save in having no mortgage for the first six months will more than compensate for those costs.

— Hold back on your offer.  Keep a reserve in hand.  After all don’t  you want to wait and see if there are other offers?  If so, you will be notified and given a second chance to bring in your “highest and best” offer.  Then make an educated decision of the properties real current market value, its value to you and give it your best shot.  But don’t get action fever and over bid.  It is always regrettable to win a bid and seriously over pay for a house.

— Consider buying a fixer upper that’s been on the market for a long time. Yours will probably be the only offer, so you may be able to negotiate a lower price and can use the savings to make the repairs and cosmetic improvements. Both FHA 203k and Fannie Mae Homepath Renovation loans allow the borrower to roll repair costs into the mortgage.

— Don’t be reluctant to bid above list price on a foreclosure.  Most of these properties are priced well below fair market value for the neighborhood, so you will likely still be buying the home below the appraised value.

— For investment property – do the math.  It might make sense to bid above list price as long as your monthly cash flow is still in double-digit percentages. To determine the annual gross potential return (i.e. before expenses), multiply the likely monthly rent times 12, and then divide that number by your cash basis (cash paid + fix up costs).

Of course you can always wait for this strong real estate market to taper off.  A recession or drastic rise in interest rates could throw cold water on the hot market.  I don’t really see that happening, but you decide what’s best for your situation.

So, whether a buyer or seller, this is a great time to get in the market as long as you have a sound strategy, patience and a great Real Estate Professional to help you get what you are after.

I hope this helps you have a better insight into what’s going on today in the real estate marketplace.  Pull that seat belt tight, it is going to continue to be quite a ride!

Have a great week!

 

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Post by Mario Acosta

Mario has written 117 articles.

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