WHAT TO EXPECT FROM SELLERS IN TODAYS MARKET

There are good sellers and bad sellers. The bad sellers still don’t want to believe that their home has loss value since the peak of the market of 2005. They may have the perfect home. It is in great condition, in a wonderful location and has all of the amenities you need. The problem is the price. They are overpriced and in many cases way overpriced. These sellers are very difficult if not impossible to be convinced of realty. If a buyer does make an offer, this seller will see it as a “low ball” offer. They may not respond with a counter offer. If they do, it will only be a few thousand off the asking price. If a buyer is smart, they will not cave in and fall for a price that is not near market value. One of the things to remember for buyers, is if you do make an offer that you really think is too high, and the offer is contingent on an appraisal, the appraisal will usually come in lower than what is offered. What happens then is a smart buyer will say to the seller, “My offer was contingent on the appraisal and it did not come in at our agreed price. You must lower the price the match the appraisal”. The seller may not agree. In that case the smart buyer can and should walk away or they are going to have to inject more funds. Not a good idea.

The good seller understands today’s market. They know that the peak was 2005. If they purchase their home in that year or very close to it, they know that their home has probably lost value. If they a good agent or broker, it has already been proven to them by recent comparable sales in their area. The value of any home today is going to be found in that home’s neighborhood. Sellers or buyers should not be swayed by web sites today such as Zillow. These sites may be fun to play with, but they are not necessarily accurate. When the home you buy is appraised, the appraiser does not use Zillow to arrive at the value. They use comparable sales in the neighborhood and pick out 3 or 4 to compare with the home to be purchased. This is the only way to arrive at a true value. Good sellers will price their properties below what they paid for it. Smart buyers should recognize the significance of that price. What it really means it this is a seller that is ready to do business. They know they are going to take a loss and have accepted that fact. Their asking price is most likely very close to the market value.

WHAT BUYERS SHOULD CONSIDER ASKING FOR WHEN MAKING AN OFFER IN TODAY’S MARKET

If a buyer is going to make an offer that is contingent on the sale of their home, they can expect resistance under certain circumstances. If that home is still on the market and is not in escrow, most smart sellers will not accept the offer. Why should they tie up their home in a slow market and not be able to accept other offers while waiting for you to sell your home? However if your home is currently in escrow, they should change the situation. Those sellers will want to look at the contract for that sale to see if they can live with it. One thing that would probably kill it is if the buyer’s home is contingent on the sale of the other buyer’s home.

Buyers may ask a seller to pay all or some of their closing costs. In the up market from the past, this did not happen. Buyers can ask for the seller to pay for their loan points if any. Buyers can ask sellers to pay for buy-downs on their loan interest rate.  Buy-downs are usually for 2 to 3 years. Buyers should be qualified for the interest rate when the buy-down ends.

Once in escrow buyers will have a professional physical inspection of the property. In most cases, the physical inspector will turn up repairs that should be addressed. Some repairs are minor. A buyer today should not expect any home to be perfect and some of these repairs probably can be ignored. But don’t ignore repairs that are more than minor. Buyers should demand that sellers make those repairs before the close of escrow. Buyers are wise not to take a price credit. Those repairs should be completed, not only for the buyer’s benefit, but the buyer’s lender will in most cases condition their loan on those repairs being completed.

IS THIS THE RIGHT TIME TO BUY?

It may not be. It depends on how long a buyer expects to be in the home. If the buyer is only going to live in this home for up to two years, then probably a buyer should rent. If however a buyer intends to be in this property for 5, 10 years or beyond, then it probably is a good time. But those buyers should be warned that they may still see some price fluctuation in the next couple of years. But if a buyer is going to be in the home long term, then these fluctuations should not be a consideration.

A buyer should not make offers with high emotions. In other words, they just have to have this home. In that case they will probably pay more than they should. If a seller senses your emotions, they will take advantage. Buyers should always have back-up homes in mind to buy. So if a seller is going to be unreasonable, a buyer has a fall back position. It may be hard to do, but buyers are advised to walk away from an offer that is much more than they should pay. If they don’t, they will have buyer’s remorse and won’t be able to do anything about it after the transaction closes

Buyers today will face much stricter underwriting from lenders when applying for a loan. Buyers will need to be more than just warm and breathing. They will have to document their income, not just state it. They will have to prove they can handle interest rate increases.

The strongest buyer to today in the eyes of a seller is one that has been pre-approved by a lender and does not have to make an offer that is contingent on the sale of their home. These buyers are really in the driver’s seat.

Buyers today are buying in an environment that has not been witnessed in many years. Interest rates are still at historic lows and inventory is at an historic high. This does not mean that all sellers are desperate. Had they sold their home three years ago, they probably would have received more than today. But many sellers still have large equities. Real Estate has cycles. The cycle today has been pointing downward for the last 3 years. How far down still remains to be seen. Real Estate is just like the stock market, it has corrections, and so does real estate market.

Today buyers are in a position that they can be very aggressive when submitting an offer. They can ask things of sellers that could never have happened just a few years ago. But sellers that have their homes priced correctly can temper that aggressiveness. More and more sellers are doing just that.

TAKE ADVANTAGE OF SPECIAL OFFERS MADE TO BUYERS

Some Brokers have become innovative in changing their business model. Real estate brokerages for years have done the same old thing. List a property for 6% and represent buyers and collect a commission of usually 3%. That worked well for years and years. But then came along the Internet. It has changed everything and especially the real estate industry. By increasing their volume, some brokers have come to realize that can charge less of a  commission for a listing and also give back part of their commission to a buyers they represent. It has come at a good time because more and more buyers and especially sellers have opened their eyes to the highest cost of any real estate transaction and that is commissions. In todays market every dollar counts now. So when a broker offer to sell your property for a commission that is much less than anyone else, pay attention and ask questions. Find out exactly how they do it and to ensure that your property will have a good chance to sell. It can and it does work. Buyers should sit up and take notice when a broker offers to represent them and to return 1% of the final sale price. That’s cash in your pocket. That’s real money. How can you loose? So don't forget to ask about the buyer's bonus provided by this brokerage.