Aug. 25, 2012
How’s the real estate market? I get a lot of questions from buyers, friends & family about real estate but this is the most common question.
A Lot is going to depend on what part of the market you’re referring to. Many agents have told me that they are very slow right now. So yes, it seems that we are in a buyer’s Market. Great for the Buyers! Not so great for the Sellers. But for sellers who are also looking to buy, most should consider that the house they buy will also be less expensive and they may be able to negotiate a bit easier than they would have been able to in the past. So, it all evens out in the end, really. For the sellers who are not looking to purchase but need to sell for other reasons, then it may prove a little more difficult.
Back to the question.
How’s The Real Estate Market?
For me, BUSY. I recently brought on two Assistants to lighten my workload. They have been an integral part of my daily routine. Because Team Silva has been dealing with a lot of Bank Owned property, we have been extremely busy. This then reverts me back to the realization for many that, it is a Buyer’s Market. Yes, it is, but when many of the buyers try to tap into the REO market and purchase something that is bank owned, they tend to place offers with the same thought process as if they were placing an offer on any other house that’s on the market. They low-ball the offer, and they usually lose the opportunity to buy a house at a great price.
Keeping in mind that many buyers feel that a lot of the properties on the market are overpriced. Not so with REO properties. Here’s the difference.
With a typical “regular” House for Sale. The Homeowner wants top dollar. I don’t blame them. You live somewhere for some time, put your sweat and hard work into making it just right and you feel as thought it’s a very valuable piece of real estate. Understandably so. So you hire a Real estate agent to give you a free service called a CMA (Comparative Market Analysis). Which essentially is an opinion of value coming from a real estate agent. So let’s say they tell you the house is worth $300,000. This is their opinion. Seller will think to himself. Hmm, 300k, I think it’s worth more, and on top of that, I have to pay a commission. So, let’s add another “Fill in the Blank Here” % and increase the asking price to XX amount of dollars. Now you have the homeowner putting in their opinion of value and more likely than not, the agent will take the listing, because remember, again, a lot of agents are not very busy right now & may be needing the work. So the property will sit on the market several months & add to the increasing inventory that is helping cause the market to be where it is at this time. (Remember Supply & Demand?)
The bank will hire a Certified Licensed Appraiser to provide an actual market value of the home with a real estate appraisal. They will also send out an REO Specialist who will give them an experienced, honest answer as to their opinion of value, and now they have 2 very similar figures. They will List the property at this figure, if not lower. So where the same type of house that is a “regular house” with a opinion of value of 300+ with a little bit of emotional attachment to it & increased sensitivity to “lowball offers” or even price reductions. You’ll then have this REO property that will be accurately listed at market value at $275,000 (see the difference here?) PLEASE BEAR IN MIND THESE ARE EXAMPLES ONLY & ARE NOT ACTUAL FIGURES OF ANY PARTICULAR Houses for Sale OR SOLD. THIS IS FOR EDUCATIONAL PURPOSES ONLY. AND FIGURES USED ARE FOR EXAMPLES ONLY.
So, 30 Days go by and the “regular house” doesn’t sell. The real estate agent gets yelled at. “Why haven’t you sold my house yet? Are you advertising enough?, etc.” The Real estate agent then will tell the homeowner what anyone else would. Well, maybe you should reduce the price. YIKES! Good Luck fellow real estate agent. Although what they are saying is true, because of the emotional attachment to the house, a homeowner may often get offended with this recommendation.
30 Days go by with an REO, and the bank with no emotional attachment to the property will reduce the price. They will review the activity, get feedback from the agent, get their recommendations or course of action plan and reduce again if needed.
Many times, the banks don’t need to reduce. Why? Because they priced it right the first time! (No, this does not apply to all of them, unfortunately, but you get my point.)
Investors are grabbing all of the great deals
I cannot tell you how many investors call me daily asking me what else I have? Anything New?
Many have quickly come to realize that if they don’t put the offer in when they see the house, they won’t get another chance.
Most buyers get stuck with the wrong thinking:
- It’s bank owned, they have to get rid of it
- The banks will take a loss
- It’s a buyers market, i’ll wait a few months until they reduce it.
Well, they soon learn that it does not apply to my world of REO. My list of investors & first time home-buyers looking to find a home is quite long. I have properties that have not even hit the market yet, that may already have buyers waiting for them.
As a result, they see them quickly and often the day it goes on the market is the day they sign their offer to be submitted.
It has happened to me many times. Read my blog post titled Under Contract in One Day.
So yes, it’s a buyers market.
But REO’s go quickly, because they are priced right. So when you go out looking for another REO property that you really LOVE, think twice about lowballing your offer because you may not get a second chance. I’ve seen it before, and I’m sure I’ll continue to see it again.