WHAT TO EXPECT FROM SELLERS TODAY.
There are good sellers and bad sellers. The bad sellers don’t want to believe that their home has loss value since the peak of 2005. Their home is in great condition, great location, and has all of the amenities you need. Trouble is, it is over priced and it may be way over priced.
Some of these sellers may over time be convinced of their futility. The longer their property is over priced, the less chance they have of selling their home.
If a buyer does make a reasonable offer, many of these sellers will see it as a low ball offer. They are insulted and may not even respond to the offer. If a buyer is smart they walk away from these homes. It is not worth their time and frustration.
But if buyers do make an offer that they feel is really too high and they make the offer contingent on the appraisal coming in at the offer price, they still have the right to walk away if the seller does not lower the price. If the buyer does buy at the appraised price, they will have to put more money down. Not a good idea.
A good seller today understands the market today. They know that their value has dropped since the peak and will price it appropriately.
The value of any home today is going to be found in the neighborhood where the home for sale is located. A seller can only compare their home with neighborhood homes and not some property 5 miles away. Sellers and buyers should not waste time trying to price homes by looking at web sites like zillow. They are not going to get an accurate number. Zillow has never been in the home, does not know the neighborhood and all of the amenities the home offers.
Appraisers do no use zillow. They value home the old fashion way. The right way.
Good sellers recognize the decreased value in their home and price it right. Buyers should recognize the significance of the asking price. It does not mean they should pay full price, but at least they have a seller that is reasonable and ready to do business. The seller knows that are not going to get the peak price of 2005 and have accepted that fact.
WHAT CONCESSIONS WHOULD THE BUYER ASK THE SELLER FOR?
Buyers making an offer contingent on the sale of their home should expect resistance from the seller under certain circumstances.
If their home is still on the market and not in escrow, most sellers will no accept the offer. Why should they tie up their home in a slow market and not be able to accept other offers while waiting the buyer to sell their home?
If the buyer’s home is currently in escrow, then that changes things. But if the buyer of the buyer’s home has made a contingency to sell their home first as well, that complicates things. A seller would have to look at their buyer’s sales contract to find out exactly what is going on.
Buyers today for the most part are aggressive when making offers. They may ask the seller to pay for many of the costs of the transaction. It may be justified or not.
Once in escrow buyers will have a physical inspection of the sale property. In most cases the inspector will turn up items that may need to be repaired. Many repairs are minor, but others are not. A buyer is probably best to concentrate on the major repairs when asking the seller to make those repairs before escrow closes. The seller may refuse. Then it is up to the buyer show bad they want the house. Or they can ask for a reduction in the sales price or and do the repairs themselves.
IS THIS THE RIGHT TIME TO BUY?
That all depends on much a buyer thinks values may drop further. It really depends on the area a buyer is looking. Many areas are holding up fairly well and others are inundated with short sales and REOs.
It also depends on how long a buyer expects to be in the home. If it is just for a couple of years, then don’t buy. But if there is an intention to be in the home for several years or more, then it just may be a good time. However they may see some price fluctuation in the neighborhood that they purchased. If they are comfortable with their payments, then they should not worry about it. In time the market will stabilize.
Home buyers should stop thinking about buying a home as a “get rich scheme”. A home is their shelter. It is where they raise their children. It where they grow old with great memories and good times with their neighbors. Buying a home should not be thought of with a Las Vegas mentality or even like investing in the stock market.
Buyers should not make offers emotionally. In other words they just have to have this property. In this case they will most likely over pay. Sellers will see those emotions and take advantage.
Buyers should make offers with the mentality of being able to walk away. Have other homes of interest you can fall back on. It may be hard to do, but it is easier than having buyer’s remorse. Then there is nothing they can do.
Let’s fact it. Getting a loan today is a lot harder than it use to be. Lenders actually want the buyer to prove they have the income necessary to support the loan. And yes they want the buyer to place a respectable down payment. If it is not a fixed loan the buyer will have to prove they can handle rate increases.
Buyers today are in an environment today that has not been witnessed in many years. Interest rates are at historic lows and the inventory of homes for sale are also at an historic high.
This does not mean all sellers are desperate. They are not going to give it away if they don’t have to. And they won't if they price their property correctly.
Buyers are in a position that they can be very aggressive when making offers. They can ask for concessions of sellers that could never have happened just a few years ago. But if sellers have their home price right, they can temper that aggressiveness. More and more sellers are doing just that.
