We are currently experiencing a BUYER’S MARKET
[Note: If you have to sell to buy, pricing your property realistically is imperative]
The real estate market is always about supply and demand. Values and pricing are based on demand – they rise when demand goes up and decline when demand decreases. We experienced a very long stretch of steadily, and sometimes rapidly, climbing property values [1998-2005] known generally as a “Seller’s Market”. Most of 2006 and into 2007 was an “adjusting” period as pricing changed to find the market and climbing values stopped. When seller’s priced correctly, properties sold, but many remained on the market and many buyers either chose to, or had to, wait [in cases where they had to sell to buy]. Thus the inventory of available properties increased. We are now experiencing a “Buyer’s Market” where supply is greater than demand. Adding to the supply is an undercurrent of increasing foreclosure properties caused by unfortunate lending practices and naïve buyers as the market was peaking in 2005 and into 2006. In a Buyer’s Market there is usually considerable “cushion” room between the asking and selling price.
FACTOR 2: A Buyer’s Market presents an opportunity to negotiate a reasonable purchase price*,
but many factors enter into that price and basing your decision to purchase solely on getting a deal for a predetermined % below asking price is unwise in that it is easy to lose sight of your main focus for purchasing. Just think about Factor 2 as an additional bonus to purchasing in a Buyer’s Market and let your buyer’s agent help guide you in negotiating.
Property values are based on what buyers have been willing to pay [SOLD price] for a similar property in a similar location recently [within a year]. This is the appraised value. Appraisals are typically done once a buyer has agreed to purchase a property for a particular price and the appraisal is ordered by the lender to “confirm” that the price is reasonable. When sales slow, there are fewer comparables, so establishing value becomes more difficult. Sellers and listing agents are more challenged to find the “right” asking price and buyers will smartly also use professionals to help them in negotiating a purchase price.
* [Negotiated SOLDS in this area are averaging 1-5% although there are isolated cases of much larger reductions]
If you require a loan to purchase you will find that some Lenders have narrowed their selection of products available as well as their qualifying standards. Credit, as always, is the single best asset you can possess. Having money for a down payment is more important than it was, but there are still opportunities for even 100% financing. Getting pre-approved before we start to look at properties is still recommended and rates are still very reasonable so this should not be an obstacle. We can help you with a lender selection if you are concerned about finding a reputable one as there are many fine ones in the area.
The Foreclosure market presents a great opportunity as well as a challenge. Properties where sellers are in financial arrears usually will consider a “short sale” [selling for less than the loan on the property] prior to actually being foreclosed [lender takes property back]. This can be a win-win for seller, buyer and bank, but requires a great deal of paperwork, patience, and time. The lender has to approve the “short sale” which can leave buyers, sellers, lenders, real estate agents and closing companies waiting for a phone call from the lender requiring them to close within 24 hours! Flexibility is essential. If you are relocating a family, you need to consider whether the “savings” is worth the aggravation! The foreclosure process may involve putting the property on the market with a real estate agent or placing it with an auctioneer to sell at foreclosure auction. Although lenders do not wish to “hold” real estate, we are experiencing communication challenges within the foreclosure proceedings process which again calls for the ability to be patient in this type of purchase. You must always weigh your opportunities versus your challenges.
So, if you are a buyer, Opportunity is Knocking! Armed with your financing in place and a professional real estate agent, this market affords you more possibilities for making a good deal than we have seen for quite sometime. Find a property that meets your wants and needs and get savings as well.
Concerned about market values climbing again? Since history has a habit of repeating itself we predict that values will climb again, probably before you are totally unpacked*
* [Based on the assumption that most people leave at least one box unpacked for at least 2 years!]