(Originally posted on February 10, 2008)
A view from the trenches
I meet new people every day, and when they ask what I do and I enthusiastically respond that I'm a Realtor, their next question is always the same. "Aw. How's business?" Yet they think they already know the answer, since it's a pretty well-known fact. Here's the funny part, I haven't been this busy since 2005.
More than ripples
Where 2007 was a lake that had no movement on it, this year we started with some ripples, which was encouraging, and now we've got little waves going. Now a ripple might not catch someone's eye, but waves certainly do. The problem is if you're looking down at the ground and not at the water, you'll most likely miss the motion.
I am currently working with over a dozen buyers - ready, willing and able buyers. Having been pre-qualified with a lender, they all have a clear understanding of what they can afford, and are shopping accordingly. There are so many homes for sale, that you feel like a kid in a candy shop. It's not true, but it feels that way.
Many of the homes are foreclosures, and they're a mixed bag. They can be move-in perfect, or there can be an evident past water leak or something that we're just not willing to deal with. Finding a home to buy has not been a problem. It's actually trying to buy the place that's frustrating.
The process of buying real estate is a pretty formal one, especially in this day and age of litigation. There's a lot of papers to fill out, all covering everyone's best interests. Legally, once you submit an offer to a seller, they have X amount of days to respond to the offer. In fact, if they don't respond, it's a felony (and the statute is clearly printed underneath the required response date.) Unfortunately, in foreclosures and short sales, while we're dealing with an agent for the "seller," the ultimate seller/approver is a bank, and they hide behind a cloak of anonymity.
In a nutshell, no response. No response in a week, or two weeks, or six weeks. This is not a secret - Realtors know this is the process and we tell our clients to have patience. But put yourself in their position, and it's hard to sit around knowing whether or not your home was sold to someone else, or if you're still in the running, or if you have to put in an entirely new bid.
It's rare that I preview a home for a client, and there aren't already 30 agents who have been there before me (we leave our business cards on the counter as evidence.) So when I find a great home and we submit an offer, we're certainly not the only ones in the pool. When the offers are too close to one another, or none meet the bank's minimum, I'll get a call from the listing agent - "The bank wants your highest and best offer, and you have until noon tomorrow to submit it." Wow, that's great. Now the ball is rolling and we should know one way or the other if we have the home. Uh, not really. I'm still waiting on results from highest and best offers that were submitted weeks ago.
Owner occupied vs. Investment
As everyone predicted, the investors have been waiting for this buyer's market and they are out in force. Equally, though, are buyers who want their first home, or a move-up home, and are emotionally attached when they find a home they really like. It's those owner occupied folks who get really frustrated by this process. On a normal sale, you'll know in two days whether your offer was accepted, but to wait six weeks or more just for a response is heart-breaking. And that's just for a response - then you have to counter back and forth for a few more weeks.
There are alternatives
Of course, we could skip the entire foreclosure market (loyal readers know I disregard short sales - and in fact, the Las Vegas short sale numbers have dropped by 500 this week alone.)
Buying a home directly from the owner is the preferred way of owning real estate. First and foremost, the seller is required to disclose the condition of the property (better known as the SRPD - Seller's Real Property Disclosure.) If the seller fails to disclose any material fact about the home, they are liable to the new owner. In a foreclosure, you waive your right to the SRPD because the bank never lived in the house and can't fill one out for you.
The negotiation process is much smoother and quicker, and you can close in about 30 days. The problem is that sellers are still pricing their homes above market price, and buyers aren't even seeing those homes as viable options.
If sellers would price their homes realistically, show their math (meaning - this is why the home is worth this much in today's market based on comparable solds of the last three months), and stick to their true low price - we'd really be rockin' and rollin'.
Negotiation is human nature
In a normal sale, everyone wants to negotiate. It sends shudders down a buyer's spine to put in a full price offer. However, on a foreclosure, we're now in a feeding frenzy and the bank is getting offers ABOVE the list price. It's the ultimate eBay auction where people want to win after becoming attached to the item up for bid. And I predict this is just the tip of the iceberg. Wait until the weather gets really nice - EVERYBODY will be out - looking and bidding, inching those prices up. Just what the banks want!
It's only a suggestion
I try and counsel my buyers so that they actually write an offer that gets accepted. Banks are not pricing the homes with extra padding in the price. They have a software program that gives them their bottom line based on the market (ours is declining), comps, condition of the home, length of time on the market, etc.
If you just can't stand to put in an offer at 100% list, then put in a 97% offer and be willing to pay your own closing costs. That should make you the new homeowner. Once you deviate from that simple formula, you'll just be noise in the system. If you're bidding on a listing all alone, you may have a shot at a counter offer from the bank, but you're rarely alone on a bid.
The press is waking up
There is such a thing as old news, and folks everywhere are getting tired of hearing about sub-prime loans, falling house values, etc. Now the new buzzword is "Recession." You'll read it here first, there will not be a recession. For as many articles I read pointing to the "R" word, there are more articles showing why we won't get there. Here's one that really breaks down the numbers (if you're a numbers person): The 2008 Economic and Housing Report.
The most interesting part of the above-referenced report is "Pent-Up Demand." We are definitely seeing this in Las Vegas, and the word will reach the press soon. There's no way I can say this is good news for sellers, it isn't. Home values are not going to go up any time soon. But it's the buyer's turn now, and those in the game are most likely to walk away winners.
Bottom line - it is a great time to buy. Las Vegas is back in the news in a good way, here's one example - Best and Worst Places to Buy a House. Do your own research and investigation, but it's time to get off the couch and in the car - it's time to move. Happy Hunting!