I withdrew one of my Iredell County listings today by mutual agreement with my seller clients. We had put the house on the market last spring, and priced it according to what little history was available in the community for similar houses. We agreed that if the house didn’t get some showings, the sellers would agree to lower their list price. Time passed, and we did get a few showings, but no offers. It tried to get them to reduce their price to get more traffic through the house, but they felt at that point that they couldn’t do it. In the meantime, houses in their neighborhood were being sold as foreclosures or short sales for much lower prices than what we would have previously expected. Those sales have pulled the “comps” down to the point where our listing was getting no attention whatsoever. The sellers don’t have to move and decided to just pull the house off the market and wait for better times. I cautioned them that per the economic gurus’ recent statements, those good times will be several years into the future. One economist said yesterday that the glut of foreclosures will not be absorbed by the market until sometime in 2013. Of course, things can happen that the economists don’t foresee that could improve the picture sooner than that, and I hope they will. I’ve seen that happen in the past, but it’s not something you can count on. Real estate sales prices in our area continue to be soft and continue to drop in some areas. If you don’t get ahead of that curve with your list price, the market will ignore you. It’s a tough lesson, but true.
This is a time when sellers who need to sell and are able to sell can find buyers, but at much lower prices than in the past. If they do that and then become buyers of their next home, they can come out “smelling like a rose” because they’ll buy the next house at a similarly low price and at 50 year low interest rates. If you don’t need to sell or the numbers don’t work for your sale, then you may as well stand pat. It serves no value to the seller or the listing agent to try to market a property that is priced above market. Marketing has its limits, and no amount of marketing will cause a person to pay a too-high price when there are better valued alternatives available.
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There are two kinds of sellers of property. The first kind, and the kind that I like most, have a reason to move that is important enough that they will price the house competitively in the current market. They understand that there are buyers out there right now how want to buy a property, have the means to buy a property, but also often have lots of choices about what property to buy. The sellers know that buyers are looking for the best value in terms of location, condition, and price. The sellers know that the buyers don’t care what the seller wants to get out of the property or what they’ve spent on the property- not their problem. The sellers know that if they plan to buy another property, then they can afford to take a little less than they’d like because they’ll likely make up for it when they change roles and become the buyers looking for the best value on their next house. These are properties that sell well in today’s market, and the sellers get to move on to the next part of their lives.
The second kind of sellers are those who would like to sell only if they can get their desired price which is usually quite a bit higher than the current market will pay. The current market is defined by what buyers have actually been paying for similar properties over the recent past, not by what sellers want, or what the tax value was two or three years ago. That was then, this is now. These sellers are waiting for what has been described as “two suitcase buyers.” These are buyers with one suitcase full of money and the other suitcase full of stupid! The irony of this is that if they do find a “two suitcase buyer” who will sign a contract for a high selling price, they better have enough cash in one of those suitcases to pay in full with no mortgage. This is because if they do have to get a mortgage, it’s likely that the home will not appraise for the sales price, and the mortgage will be denied. Most overpriced sellers never think of that until it’s too late.
Denied mortgage means no sale which means unhappy buyer, unhappy seller, and unhappy Realtors. Not good all around.
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Did you know that if you own rental property and wish to sell it, any current written lease will transfer with the property to the new owner? This can be used to the owner’s advantage since a property with a current lease and positive cash flow is more attractive to a new rental property owner. Think of it this way- if a person buys a property with the intention of leasing it, they have to be concerned with the time and cost of getting a good renter in the property. It may take weeks or months to do this, while during this time, the owner is getting no positive cash flow from the property. If you sell a property that has current renters who have kept the property in good condition and paid their rent on time, then that is a very valuable asset to the new owner.
We can offer a property for sale and for rent at the same time. If it sells first, it may go to an owner who intends to live there and will likely be willing to pay a somewhat higher price than an investor. If it rents first, then it will be more attractive to sell to investors and will likely get a higher price than if it were vacant when sold.
If there are current renters with a written lease, the owner should explain to them that he/she plans to sell the property, but that their lease protects the renters for the term of the lease. A new owner has to honor the terms of the current lease.
Let me know if you have questions about this.
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Posted in Finance, General Real Estate Market, Real Estate, tagged $6500 tax credit, $8000 tax credit, economy, first time home buyers, Home Buyers, home sales, Home Sellers, home selling, housing market, real estate market, repeat home buyers on April 30, 2010 |
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Today is the end of the First Time Home Buyer and Repeat Home Buyer tax incentives. To take advantage of one of these incentives, you have to be under contract by the end of the day today (I’m available- call me ;-) ). As we move into the months ahead, we’ll obviously be very interested in whether or not the somewhat improved housing market will continue. When the incentives were created, the theory was that they would serve as a means to jump-start the economy since so much is dependent on the housing market. Once that happened, the improved market should be able to survive and flourish without the need for a housing tax incentive.
Since that time, home sales have improved, including new home sales. We’re also seen a lot of chatter in the media about better numbers measuring both market metrics and consumer sentiment. The stock market, long viewed as a leading indicator of the overall economy, continue to rise in anticipation of a healthier economy. No doubt the unemployment numbers, the continued fall of housing prices and the expectation of continued home foreclosures are keeping the economy from taking off at a rapid pace, but the mood of the country does seem to have improved since last year.
We won’t have a realistic measure of whether housing will be able to sustain its improved performance until we get sales reports from the middle of the year. I wouldn’t trust April figures to predict a trend because of the effect of the ending on April 30 of the tax incentives, and May will likely not be trustworthy as a bellweather, either. However, by June or July, I think we’ll be able to take the measure of the improving economy’s effect on the housing market and vice-versa. People tend to isolate phenomena like the tax incentives and predict the effect on the market from just that one thing. The problem is that there are always many things going on in the world that have effects on the economy and markets so that to have any hope at all of predicting the future, you have to take into account the combined effects of all those variables working together and assume those that are changing are going to continue to change at a stable rate. Unless your crystal ball works better than mine, that’s a pretty tall order.
So just settle back, watch what happens ,and don’t pay much attention to the real estate sales numbers for a couple of months. I’m optimistic that more of us will begin to see better days, and that will be a welcome relief.
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