Wednesday, April 24, 2013
Friday, April 19, 2013
5 tips for regret free home buying this spring
If you read or watch many cooking shows or magazines, you might have noticed a trend over the past few weeks. They all seem to be focused on springtime cooking, entertaining, and recipes - how to welcome the change of weather with flower-laden tables and recipes that showcase the fresh flavors of the season.
If you’re watching the real estate market, you’re probably seeing a springtime recipe coming together right now, too, before your eyes. Yesterday, Trulia released a survey that vividly captures and quantifies the ingredients:
75% of consumers say it’s better to buy a home now than it will be a year from now
But only 1 in 3 consumers (32 percent) think it’s better to sell now than a year from now.
Mix in patient sellers, fewer foreclosures, and underwater borrowers and marinate overnight.
What do you get when you take this 2013 spring real estate recipe out of the oven? Housing inventory rates at a 12-year low, and a strong seller’s market.
While sellers sometimes make emotional mistakes, the reality is that a hot market like today’s creates massive competition among buyers, and can lead to a slippery slope of decision-making that leads to later regrets. Let’s take a look at the most common real estate regrets revealed in this new Trulia report, and what they can teach today’s home buyers about making real estate decisions they feel good about in the long run.
1. Get realistic and be aggressive. Time is of the essence. The number one real estate regret revealed in the survey was a regret of renters, not owners: 42% of of them said they wished they had bought, rather than rented, their current home.
The process of successfully buying a home on a market like today’s is laden with points at which every buyer must face the pain of some hard-to-swallow truths:
Truth: It might take longer to buy than you thought.
Truth: You’ll very possibly lose a few homes you love before you are successful.
Truth: Your home buying dollar might not afford you the mini-manse of your fantasies.
Truth: You might have to offer more than the asking price and compete with other buyers in order to make your home buying visions a reality.
The buyers who face these truths head on are those who position themselves to make reality-based, aggressive home buying moves like house hunting in a slightly lower price range so they can offer more than asking without blowing their budget. The buyers who avoid the pain of being realistic about these issues are the ones who will end up still renting next year, regretting that they didn’t align their expectations with reality sooner. Of course, every market is different - this is why it’s uber-important that you work with a local agent to understand the realities of your market and how you can optimize your house hunt for them.
2. Buy a home that will work for the household you envision 5 or 10 years down the road. I’ve long recommended that buyers kickstart their house hunts with a “Vision of Home” writing exercise, in which you actually write down your vision for the life you want to live in the home you’re preparing to buy. This is all about creating a vision for every area of your life, from your work (and how you get there every day), to your family and cohabitants (who you envision living with, not just now, but down the line), your activities and your families and even how you spend your spare time (gardening, entertaining, tinkering, yoga-ing, etc.)
This exercise helps avoid the number two most common real estate regret uncovered in the study: 34% of respondents said they wished they had chosen a larger home. It helps by course-correcting any overly limiting assumptions you might make if you based the size of home you should buy strictly around the number of family members you have now or in the near future. It helps you plan your space needs around the living and activities you’ll want to be able to do in the home, not just the sleeping areas you’ll need for individual family members. It also helps you take a longer-term view of family and space planning to anticipate issues like whether you’ll want to take in an aging parent, allow for a young adult child to come back home, or have space for a nanny or tenant.
3. Be honest with yourself about your interest and ability to fix a home up, before you buy. Here’s a lesson I’ve learned from experience: if a new homeowner doesn’t make the fixes they plan within the first year after closing, chances are they won’t make them for many years - maybe even until they are planning to sell the place again! Obviously, there are exceptions - there are the folks who have a 15-year roadmap for home improvements in place before escrow even closes, and who execute it meticulously. But these are the exceptions - for most of us, human nature is to get comfortable or complacent with the way the home is, or to have life and everyday expenses get in the way of our remodeling plans and never end up doing all the fixes we plan.
Twenty-seven percent of survey respondents said they wish they would have done a more thorough set of remodel projects, renovations, updates or upgrades to the property when they bought it. But the way to avoid this regret is two-fold. First, you can make sure that you have a budget and a firm plan of action for the home upgrades you want before you close the deal, versus a vague sense that you need to “do something” with the kitchen. This might involve getting actual contractor bids during escrow and even having some or all of your desired work done after closing and before you actually move in, to maximize both your chances of actually following through on your home improvement plans and the enjoyment you get out of the upgrades.
The other way to avoid this regret is to simply be honest with yourself. If you’re not the type to follow through on a fixer-upper plan of action, take this into account when you choose your home so as not to end up in a place you’ll regret not fixing. Find a place, instead, in a condition you can live with, even if you don’t do much (or any) work to it, after you buy.
4. Ask every question - then ask a few more. And read everything you are given. Twenty-two percent of homeowners surveyed said they wish they had more information about their home before they decided to buy it. The fact is, much of the information homeowners regret not having is actually at every home buyer’s disposal - though it might take some work to get it.
For example, some homeowners wish they’d known more about their neighbors and neighborhood, which can be collected during the house hunt by knocking on doors, meeting the neighbors, google-searching and investigating the neighborhood online and even visiting the home and surrounding area at different times of day and days of the week/weekend.
Others might wish they’d known more about the property itself, or the Homeowner's Association. I’ve found that buyers miss out on valuable property information when they don’t attend their home inspections in person, or when they fail to fully read, understand, ask questions about or follow up on their home, pest, roof and specialty inspection reports. For instance, your home inspector might be willing or able to show you how to operate certain systems or use your emergency gas and water shut offs if you are onsite during the inspection - things you might wish you knew later on. Also, they can often verbalize valuable insight and nuance to the property issues they find, if you’re onsite during the inspection - you miss this information if you don’t attend. And if you fail to actually obtain any follow-up inspections the general home inspector recommends (e.g. plumbing or electrical inspections) you can be in for an un-fun surprise over the long run.
So read your reports and your HOA disclosures, even though they are long, tedious and some might say, border on boring. And be aggressive about asking your agent and your inspectors to help you understand how you can gather the information that’s important to you. There is more available than you might guess.
5. Focus your spring workouts on whipping your money matters into shape. The final two real estate regrets articulated by survey respondents were related: 18% wish they had put down a larger down payment on their home, and 16% wish they had been more financially secure before they bought a home. So much of what we talk about in terms of financial preparations for home buying is about doing the bare minimum to qualify for the sort of home we want, in terms of saving up the minimum down payment that will allow us to afford to buy at our desired purchase price, getting our credit together and making sure we have all our documents lined up and spruced up for a lender’s underwriter. But none of these things actually solve for the regrets these former buyers express. The only path to avoid these later issues is to view home buying as an opportunity to take a concerted deep dive into your finances and make an ongoing, lifelong commitment to financial integrity.
This means: really exploring your values and priorities in life, and aligning your finances with them in every way keeping a current financial or monthly spending plan that includes not just your mortgage but also carves out sufficient resources for saving, investing and other things that are important to your future, and staying accountable to these values and your plans, even through the process of becoming a homeowner.
There are dozens of books, resources and financial professionals who can help you ensure that you execute home ownership in a way that is ultimately beneficial to your financial well-being and not harmful to it. This includes timing your house hunt to align with when you’ve achieved certain financial benchmarks (e.g., paid off your student loans, saved up X dollars) or have cultivated particular financial habits (e.g., consistently save 10% of your take-home income, have paid every bill on time for three years or more).
If you’re watching the real estate market, you’re probably seeing a springtime recipe coming together right now, too, before your eyes. Yesterday, Trulia released a survey that vividly captures and quantifies the ingredients:
75% of consumers say it’s better to buy a home now than it will be a year from now
But only 1 in 3 consumers (32 percent) think it’s better to sell now than a year from now.
Mix in patient sellers, fewer foreclosures, and underwater borrowers and marinate overnight.
What do you get when you take this 2013 spring real estate recipe out of the oven? Housing inventory rates at a 12-year low, and a strong seller’s market.
While sellers sometimes make emotional mistakes, the reality is that a hot market like today’s creates massive competition among buyers, and can lead to a slippery slope of decision-making that leads to later regrets. Let’s take a look at the most common real estate regrets revealed in this new Trulia report, and what they can teach today’s home buyers about making real estate decisions they feel good about in the long run.
1. Get realistic and be aggressive. Time is of the essence. The number one real estate regret revealed in the survey was a regret of renters, not owners: 42% of of them said they wished they had bought, rather than rented, their current home.
The process of successfully buying a home on a market like today’s is laden with points at which every buyer must face the pain of some hard-to-swallow truths:
Truth: It might take longer to buy than you thought.
Truth: You’ll very possibly lose a few homes you love before you are successful.
Truth: Your home buying dollar might not afford you the mini-manse of your fantasies.
Truth: You might have to offer more than the asking price and compete with other buyers in order to make your home buying visions a reality.
The buyers who face these truths head on are those who position themselves to make reality-based, aggressive home buying moves like house hunting in a slightly lower price range so they can offer more than asking without blowing their budget. The buyers who avoid the pain of being realistic about these issues are the ones who will end up still renting next year, regretting that they didn’t align their expectations with reality sooner. Of course, every market is different - this is why it’s uber-important that you work with a local agent to understand the realities of your market and how you can optimize your house hunt for them.
2. Buy a home that will work for the household you envision 5 or 10 years down the road. I’ve long recommended that buyers kickstart their house hunts with a “Vision of Home” writing exercise, in which you actually write down your vision for the life you want to live in the home you’re preparing to buy. This is all about creating a vision for every area of your life, from your work (and how you get there every day), to your family and cohabitants (who you envision living with, not just now, but down the line), your activities and your families and even how you spend your spare time (gardening, entertaining, tinkering, yoga-ing, etc.)
This exercise helps avoid the number two most common real estate regret uncovered in the study: 34% of respondents said they wished they had chosen a larger home. It helps by course-correcting any overly limiting assumptions you might make if you based the size of home you should buy strictly around the number of family members you have now or in the near future. It helps you plan your space needs around the living and activities you’ll want to be able to do in the home, not just the sleeping areas you’ll need for individual family members. It also helps you take a longer-term view of family and space planning to anticipate issues like whether you’ll want to take in an aging parent, allow for a young adult child to come back home, or have space for a nanny or tenant.
3. Be honest with yourself about your interest and ability to fix a home up, before you buy. Here’s a lesson I’ve learned from experience: if a new homeowner doesn’t make the fixes they plan within the first year after closing, chances are they won’t make them for many years - maybe even until they are planning to sell the place again! Obviously, there are exceptions - there are the folks who have a 15-year roadmap for home improvements in place before escrow even closes, and who execute it meticulously. But these are the exceptions - for most of us, human nature is to get comfortable or complacent with the way the home is, or to have life and everyday expenses get in the way of our remodeling plans and never end up doing all the fixes we plan.
Twenty-seven percent of survey respondents said they wish they would have done a more thorough set of remodel projects, renovations, updates or upgrades to the property when they bought it. But the way to avoid this regret is two-fold. First, you can make sure that you have a budget and a firm plan of action for the home upgrades you want before you close the deal, versus a vague sense that you need to “do something” with the kitchen. This might involve getting actual contractor bids during escrow and even having some or all of your desired work done after closing and before you actually move in, to maximize both your chances of actually following through on your home improvement plans and the enjoyment you get out of the upgrades.
The other way to avoid this regret is to simply be honest with yourself. If you’re not the type to follow through on a fixer-upper plan of action, take this into account when you choose your home so as not to end up in a place you’ll regret not fixing. Find a place, instead, in a condition you can live with, even if you don’t do much (or any) work to it, after you buy.
4. Ask every question - then ask a few more. And read everything you are given. Twenty-two percent of homeowners surveyed said they wish they had more information about their home before they decided to buy it. The fact is, much of the information homeowners regret not having is actually at every home buyer’s disposal - though it might take some work to get it.
For example, some homeowners wish they’d known more about their neighbors and neighborhood, which can be collected during the house hunt by knocking on doors, meeting the neighbors, google-searching and investigating the neighborhood online and even visiting the home and surrounding area at different times of day and days of the week/weekend.
Others might wish they’d known more about the property itself, or the Homeowner's Association. I’ve found that buyers miss out on valuable property information when they don’t attend their home inspections in person, or when they fail to fully read, understand, ask questions about or follow up on their home, pest, roof and specialty inspection reports. For instance, your home inspector might be willing or able to show you how to operate certain systems or use your emergency gas and water shut offs if you are onsite during the inspection - things you might wish you knew later on. Also, they can often verbalize valuable insight and nuance to the property issues they find, if you’re onsite during the inspection - you miss this information if you don’t attend. And if you fail to actually obtain any follow-up inspections the general home inspector recommends (e.g. plumbing or electrical inspections) you can be in for an un-fun surprise over the long run.
So read your reports and your HOA disclosures, even though they are long, tedious and some might say, border on boring. And be aggressive about asking your agent and your inspectors to help you understand how you can gather the information that’s important to you. There is more available than you might guess.
5. Focus your spring workouts on whipping your money matters into shape. The final two real estate regrets articulated by survey respondents were related: 18% wish they had put down a larger down payment on their home, and 16% wish they had been more financially secure before they bought a home. So much of what we talk about in terms of financial preparations for home buying is about doing the bare minimum to qualify for the sort of home we want, in terms of saving up the minimum down payment that will allow us to afford to buy at our desired purchase price, getting our credit together and making sure we have all our documents lined up and spruced up for a lender’s underwriter. But none of these things actually solve for the regrets these former buyers express. The only path to avoid these later issues is to view home buying as an opportunity to take a concerted deep dive into your finances and make an ongoing, lifelong commitment to financial integrity.
This means: really exploring your values and priorities in life, and aligning your finances with them in every way keeping a current financial or monthly spending plan that includes not just your mortgage but also carves out sufficient resources for saving, investing and other things that are important to your future, and staying accountable to these values and your plans, even through the process of becoming a homeowner.
There are dozens of books, resources and financial professionals who can help you ensure that you execute home ownership in a way that is ultimately beneficial to your financial well-being and not harmful to it. This includes timing your house hunt to align with when you’ve achieved certain financial benchmarks (e.g., paid off your student loans, saved up X dollars) or have cultivated particular financial habits (e.g., consistently save 10% of your take-home income, have paid every bill on time for three years or more).
Regrets among buyers and renters
Slightly more than half of Americans harbor at least one regret about their current home, according to Trulia’s Real Estate Regrets survey. In today’s seller’s market, buyers are especially vulnerable to making decisions they may regret in the future.
“Faced with limited inventory, many buyers will feel pressure to act fast—but snap decisions often end in regrets,” said Jed Kolko, chief economist.
One of the common missteps of new homeowners, according to Kolko, is buying before reaching financial stability. “Many buyers would have fewer regrets if they waited until they were in strong enough financial shape to afford a house that really meets their needs,” he said.
The top regret listed among homeowners is not choosing a larger home. Thirty-four percent of homeowners cited this regret in Trulia’s survey.
The second most common regret among homeowners is not remodeling more when they purchased their current homes.
Among renters, the top regret—listed by 42 percent of respondents—is the decision to rent rather than purchase their current homes.
Overall, renters are more likely to harbor regrets of any kind toward their current living situation than are homebuyers. Fifty-six percent of renters shared regrets, while 50 percent of homeowners admitted to regrets about their current homes.
The survey also found older homeowners are less likely to regret their home choices. About 75 percent of homeowners ages 18 to 34 have regrets about their homes, while 36 percent of homeowners at least 55 years of age have regrets about their homes.
Homeowner regret has declined in recent years compared to about a decade ago. Those who purchased homes between 2003 and 2009 have a 63 percent regret rate, while those who have purchased homes since 2010 have a 55 percent regret rate.
With three-fourths of Americans believing now is a better time to buy a home than next year and less than one-third of Americans believing now is a better time to sell a home than next year, the current market is set for a disconnect, which may lead to more buyer regret, according to Trulia.
Foreclosures are no longer flooding the market. New construction is still meager, and hopeful sellers are willing to wait for favorable prices.
“This year’s housing season will likely cause aggressive buyers to scramble in order to try to win bidding wars and overcome stiff competition—putting them at risk of making real estate mistakes they will regret,”
“Faced with limited inventory, many buyers will feel pressure to act fast—but snap decisions often end in regrets,” said Jed Kolko, chief economist.
One of the common missteps of new homeowners, according to Kolko, is buying before reaching financial stability. “Many buyers would have fewer regrets if they waited until they were in strong enough financial shape to afford a house that really meets their needs,” he said.
The top regret listed among homeowners is not choosing a larger home. Thirty-four percent of homeowners cited this regret in Trulia’s survey.
The second most common regret among homeowners is not remodeling more when they purchased their current homes.
Among renters, the top regret—listed by 42 percent of respondents—is the decision to rent rather than purchase their current homes.
Overall, renters are more likely to harbor regrets of any kind toward their current living situation than are homebuyers. Fifty-six percent of renters shared regrets, while 50 percent of homeowners admitted to regrets about their current homes.
The survey also found older homeowners are less likely to regret their home choices. About 75 percent of homeowners ages 18 to 34 have regrets about their homes, while 36 percent of homeowners at least 55 years of age have regrets about their homes.
Homeowner regret has declined in recent years compared to about a decade ago. Those who purchased homes between 2003 and 2009 have a 63 percent regret rate, while those who have purchased homes since 2010 have a 55 percent regret rate.
With three-fourths of Americans believing now is a better time to buy a home than next year and less than one-third of Americans believing now is a better time to sell a home than next year, the current market is set for a disconnect, which may lead to more buyer regret, according to Trulia.
Foreclosures are no longer flooding the market. New construction is still meager, and hopeful sellers are willing to wait for favorable prices.
“This year’s housing season will likely cause aggressive buyers to scramble in order to try to win bidding wars and overcome stiff competition—putting them at risk of making real estate mistakes they will regret,”
Friday, April 12, 2013
Fixed Interest Rates Drop After a Weak Jobs Report
Fixed mortgage rates plummeted this week following the release of disappointing employment data for March.
According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage ( FRM ) averaged 3.43 percent (0.8 point) for the week ending April 11, down from 3.54 percent last week. A year ago, the 30-year FRM was averaging 3.88 percent.
The 15-year FRM this week averaged 2.65 percent (0.7 point), down from 2.74 percent in the last survey.
Adjustable rates also fell, though not as drastically. The 5-year hybrid adjustable-rate mortgage ( ARM ) averaged 2.62 percent (0.5 point) this week from 2.65 percent last week, while the 1-year ARM average fell to 2.62 percent (0.3 point) from 2.63 percent previously.
The sharp drop follows last Friday’s lackluster unemployment report from the Bureau of Labor Statistics, which showed only 88,000 net new jobs added in March. While the unemployment rate declined to 7.6 percent, the drop was mostly due to the loss of nearly half a million people from the workforce.
Bankrate.com also reported significant declines in its weekly national survey. According to the site, the 30-year fixed averaged 3.64 percent (from 3.73 percent), while the 15-year fixed averaged 2.89 percent (from 2.95 percent).
The average rate on the 5/1 ARM , meanwhile, was 2.70 percent, down from 2.72 percent.
“Mortgage rates have now fallen four consecutive weeks,” Bankrate noted in a release. “The pullback started with the banking crisis in Cyprus, continued with a run of uninspiring U.S. economic data, and picked up speed with the weak jobs report. But as the sting of the lousy jobs report slowly wears off, we’ll likely see mortgage rates crawling back over the coming week.”
Two-thirds of panelists surveyed for Bankrate’s weekly Rate Trend Index agreed that rates won’t change significantly over the next week, while the remainder predicted an increase. No experts surveyed anticipate further declines in the coming week.
According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage ( FRM ) averaged 3.43 percent (0.8 point) for the week ending April 11, down from 3.54 percent last week. A year ago, the 30-year FRM was averaging 3.88 percent.
The 15-year FRM this week averaged 2.65 percent (0.7 point), down from 2.74 percent in the last survey.
Adjustable rates also fell, though not as drastically. The 5-year hybrid adjustable-rate mortgage ( ARM ) averaged 2.62 percent (0.5 point) this week from 2.65 percent last week, while the 1-year ARM average fell to 2.62 percent (0.3 point) from 2.63 percent previously.
The sharp drop follows last Friday’s lackluster unemployment report from the Bureau of Labor Statistics, which showed only 88,000 net new jobs added in March. While the unemployment rate declined to 7.6 percent, the drop was mostly due to the loss of nearly half a million people from the workforce.
Bankrate.com also reported significant declines in its weekly national survey. According to the site, the 30-year fixed averaged 3.64 percent (from 3.73 percent), while the 15-year fixed averaged 2.89 percent (from 2.95 percent).
The average rate on the 5/1 ARM , meanwhile, was 2.70 percent, down from 2.72 percent.
“Mortgage rates have now fallen four consecutive weeks,” Bankrate noted in a release. “The pullback started with the banking crisis in Cyprus, continued with a run of uninspiring U.S. economic data, and picked up speed with the weak jobs report. But as the sting of the lousy jobs report slowly wears off, we’ll likely see mortgage rates crawling back over the coming week.”
Two-thirds of panelists surveyed for Bankrate’s weekly Rate Trend Index agreed that rates won’t change significantly over the next week, while the remainder predicted an increase. No experts surveyed anticipate further declines in the coming week.
Foreclosure Activity Falls to Lowest Level Since 2007
Despite a monthly uptick in foreclosure starts, first quarter foreclosure activity fell to a six-year low, according to RealtyTrac’s foreclosure market report for the first quarter and March.
Data from RealtyTrac showed 442,117 properties received some type of foreclosure filing—default notices, scheduled auctions and bank repossessions-in Q1. The figure represents the lowest level since Q2 2007 and a quarterly and yearly decrease of 12 percent and 23 percent, respectively.
Meanwhile, foreclosure starts, which numbered 73,113 in March, moved higher for the second straight month and posted a 2 percent increase from February. Foreclosure starts, however, were down 28 percent from a year ago.
At the same time, RealtyTrac found bank repossessions (REOs) slumped to the lowest level since September 2007. In March, banks repossessed 43,597 properties, down 3 percent from February and down 21 percent from a year ago.
Even though foreclosure starts were down year-over-year, 12 states still experienced annual increases. States with the biggest annual increases were New York (+200 percent), Maryland (+194 percent), Washington (+154 percent), Arkansas (+101 percent), and Nevada (+88 percent).
Certain states also saw a surge in REO activity, including Arkansas (+121 percent) Maryland (+114 percent), Washington (+88 percent), Pennsylvania (+41 percent), and Ohio (+39 percent).
“Although the overall national foreclosure trend continues to head lower, late-blooming foreclosures are bolting higher in some local markets where aggressive foreclosure prevention efforts in previous years are wearing off,” explained Daren Blomquist, VP at RealtyTrac.
Florida continued to take the spotlight for its high levels of foreclosure activity. The state recorded the highest number of foreclosure filings—85,671—in Q1 and posted the highest foreclosure rate. In addition, out of the 10 metros with the highest foreclosure rate, seven were in Florida.
The Florida cities were Miami (No. 1), Orlando (No. 2), Ocala (No. 3), Tampa (No. 5), Jacksonville (No. 7), Palm Bay (No. 8), and Lakeland (No. 10).
Data from RealtyTrac showed 442,117 properties received some type of foreclosure filing—default notices, scheduled auctions and bank repossessions-in Q1. The figure represents the lowest level since Q2 2007 and a quarterly and yearly decrease of 12 percent and 23 percent, respectively.
Meanwhile, foreclosure starts, which numbered 73,113 in March, moved higher for the second straight month and posted a 2 percent increase from February. Foreclosure starts, however, were down 28 percent from a year ago.
At the same time, RealtyTrac found bank repossessions (REOs) slumped to the lowest level since September 2007. In March, banks repossessed 43,597 properties, down 3 percent from February and down 21 percent from a year ago.
Even though foreclosure starts were down year-over-year, 12 states still experienced annual increases. States with the biggest annual increases were New York (+200 percent), Maryland (+194 percent), Washington (+154 percent), Arkansas (+101 percent), and Nevada (+88 percent).
Certain states also saw a surge in REO activity, including Arkansas (+121 percent) Maryland (+114 percent), Washington (+88 percent), Pennsylvania (+41 percent), and Ohio (+39 percent).
“Although the overall national foreclosure trend continues to head lower, late-blooming foreclosures are bolting higher in some local markets where aggressive foreclosure prevention efforts in previous years are wearing off,” explained Daren Blomquist, VP at RealtyTrac.
Florida continued to take the spotlight for its high levels of foreclosure activity. The state recorded the highest number of foreclosure filings—85,671—in Q1 and posted the highest foreclosure rate. In addition, out of the 10 metros with the highest foreclosure rate, seven were in Florida.
The Florida cities were Miami (No. 1), Orlando (No. 2), Ocala (No. 3), Tampa (No. 5), Jacksonville (No. 7), Palm Bay (No. 8), and Lakeland (No. 10).
Thursday, April 11, 2013
5 Mistakes Home Sellers Can Make
Have you ever said something in the heat of the moment, then wished for weeks later you could reel those words back in? Truth is, all of us commit emotion-driven mistakes in some areas of our lives. But when it comes to selling your home - read: cashing out your most valuable asset - the stakes are simply too, too high to allow yourself and your transaction to fall prey to predictable emotional pitfalls.
Fortunately, when it comes to emotion, what’s predictable is avoidable if you’re willing to acknowledge and correct for your own feelings and how they can foul up your decision-making. This list will help you predict - and better yet, avoid - some common decision traps driven by emotions.
1. Price reduction paralysis. Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.” But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.
In cases of overpricing, the seller has most often started out as overconfident in their home’s prospects on the current market. But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined. This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast.
Unfortunately, this panic is often accompanied by a fear that actually reducing the home’s list price will actually kick off the snowball effect. This couldn’t be further from the truth: when a home is dramatically overpriced, cutting the price is the only way to fix the scenario (besides pulling it off the market entirely) and render the home more compelling to buyers. Some sellers have actually found that reducing their price gets them to a sweet spot wherein their home receives multiple offers and sells somewhere between the reduced price and the original list price.
But sellers who cannot manage their fear and panic can end up paralyzed, unable to cut the list price. And this begins the snowball effect of more and more days on the market, which aggressive buyers watch until they believe the seller’s desperation will make them amenable to a lowball offer.
The best way to deactivate this panic is to put a plan in place before it ever arises. Work with your agent to understand how to use the data around how long most homes in your area take to sell as a guidepost for making price reductions, if and when the need arises.
2. Excessive attachment. Yes, this is the place your kid took her first steps, the place you carried your bride over the threshold, maybe even the place your parents built with their bare hands. But at the time you make a decision to sell it, it also becomes a property, an asset, that like any other good you would sell in the course of business, must be marketed and priced and transacted for.
Sellers who are excessively attached to a home are likely to:
overprice it
ignore market data, like the recent sales prices of comparable homes nearby
disregard their agent’s staging advice
improperly prepare their home for the market, failing to update or neutralize the decor
be irrational in negotiations around price or repairs
refuse to respond appropriately to market feedback, like no showings or offers even after it’s been on the market for weeks or months.
Buyers don’t know the emotional value your home holds for you. Nor do they care - and they certainly have no interest or intention to pay for it. If you want to stay attached to your home, keep it - no harm, no foul. But if you truly want to sell it, you must release yourself from your emotional attachment to it.
3. Ignoring the needs of your target audience. Again, by virtue of putting your home on the market for sale, you have become a de facto marketer. And every marketer knows that it’s essential to understand your target buyer’s wants, needs and lifestyle in order to get top dollar for your product (that’s your home). It’s up to you - working with your agent, of course - to figure out who the target market for your home is and to market it accordingly.
If your home is a 2 bedroom condo with a coffee shop on the ground floor and a subway station at the end of the block, your target buyer is likely to prioritize things like efficient storage spaces and room for entertaining. If your home is a rambling 3 story rancher on a half-acre, chances are good that pets and kids are likely to be high priorities on your home’s target buyers’ list.
Understanding your target market is one thing - marketing appropriately for them is another. Your condo’s buyer might be drawn in by mentions of built-in closet organizers, an espresso machine included in the sale and incentives like HOA dues paid a few months in advance. Also, make sure you mention just how close and convenient the place is to the subway station entrance (and mention the station by name) in the home’s marketing materials.
On the other hand, if young or growing families comprise the audience for your home, mentioning custom play structures, the organic vegetable garden, the proximity to quality schools and the built-in desks that are in each “kid’s” room, might be the way to help your home’s listing stand out from the rest.
4. Celebrating too soon. An old friend of mine who happened to be a former pro athlete would often shake his head when a team went wild over a mid-game rally. His mantra: “Don’t celebrate too soon.” In sports, some say that celebrating too soon can cause you to relax and play less aggressively or less defensively for the rest of the game, giving your opponent a chance to make a last minute comeback.
And the same is true in real estate. Multiple offers and above-asking sales prices happen frequently on today’s market, but it’s critical not to assume your home will be in that number until a deal is actually closed. Sellers who “celebrate too soon,” so to speak, can put themselves at a disadvantage in a number of ways, like:
Cheaping out on staging, failing to do all the items on their property prep list
Overpricing their homes, assuming the demand-supply imbalance will automatically swing in their favor
Getting sloppy in how they maintain their homes on a daily basis, while they are still on the market, and
Making large purchases or spending their house proceeds “in advance,” while the buyer’s loan and inspections are still pending.
Even on today’s market, deals sometimes fall out of escrow because a buyer has a change in their life, their job or their family, or because they simply turn out not to qualify for the loan they were pre-approved to receive. Smart sellers stay vigilant and keep their houses meticulous and their finances in good shape throughout the entire time frame from property preparation through close of escrow. Work with your agent and your mortgage broker around timing your purchase of your next home in a way that makes sense vis-a-vis your current home’s listing and sale.
5. Price confusion. Some sellers have a confused understanding of the mechanics of determining the fair market value of a home and setting a list price. This leaves them vulnerable to the trap of letting their financial self-interest and fantasies for the future get in the way of setting a smart list price.
See, a home’s fair market value is defined by what a qualified buyer will pay for it at a given moment in time. The best way to estimate or approximate that for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the comparables or “comps” - most listing agents will do a formal version of this process called a Comparative Market Analysis, and present that to a seller to consider in setting the list price for their own home.
If a home is more or less upgraded, spacious or well-located than the comps, or if the market has moved up or down since the time the comps were sold, it might warrant listing the property at a price higher or lower than the comps indicate. And if a seller is aggressively trying to get buyers into a property to create a bidding war, they might even go so far as to discount the list price a bit from what the comps, making the home seem like a great value in order to drive buyer traffic and interest (whether this strategy is appropriate for any given property is a subject for conversation between a seller and their agent).
All that said, some sellers are so emotional about their plans for the next stage of their life that they convince themselves to base the list price for their current home not on its fair market value or marketing considerations, but based on how much money they need to fund their next home purchase or their move to Malaysia. (I’ve been watching too much House Hunters International - don’t mind me.)
This is the quickest, most lethal route to pricing your home so high no one comes to see it and it lags on the market, a road which usually ends in no offers at all, or very low ones. Smart sellers can combat this tendency by staying fixated on the comparable sales data, and committing to being responsive to market feedback like low buyer traffic or having your home sit on the market for many days beyond the average in your area.
Fortunately, when it comes to emotion, what’s predictable is avoidable if you’re willing to acknowledge and correct for your own feelings and how they can foul up your decision-making. This list will help you predict - and better yet, avoid - some common decision traps driven by emotions.
1. Price reduction paralysis. Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.” But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.
In cases of overpricing, the seller has most often started out as overconfident in their home’s prospects on the current market. But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined. This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast.
Unfortunately, this panic is often accompanied by a fear that actually reducing the home’s list price will actually kick off the snowball effect. This couldn’t be further from the truth: when a home is dramatically overpriced, cutting the price is the only way to fix the scenario (besides pulling it off the market entirely) and render the home more compelling to buyers. Some sellers have actually found that reducing their price gets them to a sweet spot wherein their home receives multiple offers and sells somewhere between the reduced price and the original list price.
But sellers who cannot manage their fear and panic can end up paralyzed, unable to cut the list price. And this begins the snowball effect of more and more days on the market, which aggressive buyers watch until they believe the seller’s desperation will make them amenable to a lowball offer.
The best way to deactivate this panic is to put a plan in place before it ever arises. Work with your agent to understand how to use the data around how long most homes in your area take to sell as a guidepost for making price reductions, if and when the need arises.
2. Excessive attachment. Yes, this is the place your kid took her first steps, the place you carried your bride over the threshold, maybe even the place your parents built with their bare hands. But at the time you make a decision to sell it, it also becomes a property, an asset, that like any other good you would sell in the course of business, must be marketed and priced and transacted for.
Sellers who are excessively attached to a home are likely to:
overprice it
ignore market data, like the recent sales prices of comparable homes nearby
disregard their agent’s staging advice
improperly prepare their home for the market, failing to update or neutralize the decor
be irrational in negotiations around price or repairs
refuse to respond appropriately to market feedback, like no showings or offers even after it’s been on the market for weeks or months.
Buyers don’t know the emotional value your home holds for you. Nor do they care - and they certainly have no interest or intention to pay for it. If you want to stay attached to your home, keep it - no harm, no foul. But if you truly want to sell it, you must release yourself from your emotional attachment to it.
3. Ignoring the needs of your target audience. Again, by virtue of putting your home on the market for sale, you have become a de facto marketer. And every marketer knows that it’s essential to understand your target buyer’s wants, needs and lifestyle in order to get top dollar for your product (that’s your home). It’s up to you - working with your agent, of course - to figure out who the target market for your home is and to market it accordingly.
If your home is a 2 bedroom condo with a coffee shop on the ground floor and a subway station at the end of the block, your target buyer is likely to prioritize things like efficient storage spaces and room for entertaining. If your home is a rambling 3 story rancher on a half-acre, chances are good that pets and kids are likely to be high priorities on your home’s target buyers’ list.
Understanding your target market is one thing - marketing appropriately for them is another. Your condo’s buyer might be drawn in by mentions of built-in closet organizers, an espresso machine included in the sale and incentives like HOA dues paid a few months in advance. Also, make sure you mention just how close and convenient the place is to the subway station entrance (and mention the station by name) in the home’s marketing materials.
On the other hand, if young or growing families comprise the audience for your home, mentioning custom play structures, the organic vegetable garden, the proximity to quality schools and the built-in desks that are in each “kid’s” room, might be the way to help your home’s listing stand out from the rest.
4. Celebrating too soon. An old friend of mine who happened to be a former pro athlete would often shake his head when a team went wild over a mid-game rally. His mantra: “Don’t celebrate too soon.” In sports, some say that celebrating too soon can cause you to relax and play less aggressively or less defensively for the rest of the game, giving your opponent a chance to make a last minute comeback.
And the same is true in real estate. Multiple offers and above-asking sales prices happen frequently on today’s market, but it’s critical not to assume your home will be in that number until a deal is actually closed. Sellers who “celebrate too soon,” so to speak, can put themselves at a disadvantage in a number of ways, like:
Cheaping out on staging, failing to do all the items on their property prep list
Overpricing their homes, assuming the demand-supply imbalance will automatically swing in their favor
Getting sloppy in how they maintain their homes on a daily basis, while they are still on the market, and
Making large purchases or spending their house proceeds “in advance,” while the buyer’s loan and inspections are still pending.
Even on today’s market, deals sometimes fall out of escrow because a buyer has a change in their life, their job or their family, or because they simply turn out not to qualify for the loan they were pre-approved to receive. Smart sellers stay vigilant and keep their houses meticulous and their finances in good shape throughout the entire time frame from property preparation through close of escrow. Work with your agent and your mortgage broker around timing your purchase of your next home in a way that makes sense vis-a-vis your current home’s listing and sale.
5. Price confusion. Some sellers have a confused understanding of the mechanics of determining the fair market value of a home and setting a list price. This leaves them vulnerable to the trap of letting their financial self-interest and fantasies for the future get in the way of setting a smart list price.
See, a home’s fair market value is defined by what a qualified buyer will pay for it at a given moment in time. The best way to estimate or approximate that for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the comparables or “comps” - most listing agents will do a formal version of this process called a Comparative Market Analysis, and present that to a seller to consider in setting the list price for their own home.
If a home is more or less upgraded, spacious or well-located than the comps, or if the market has moved up or down since the time the comps were sold, it might warrant listing the property at a price higher or lower than the comps indicate. And if a seller is aggressively trying to get buyers into a property to create a bidding war, they might even go so far as to discount the list price a bit from what the comps, making the home seem like a great value in order to drive buyer traffic and interest (whether this strategy is appropriate for any given property is a subject for conversation between a seller and their agent).
All that said, some sellers are so emotional about their plans for the next stage of their life that they convince themselves to base the list price for their current home not on its fair market value or marketing considerations, but based on how much money they need to fund their next home purchase or their move to Malaysia. (I’ve been watching too much House Hunters International - don’t mind me.)
This is the quickest, most lethal route to pricing your home so high no one comes to see it and it lags on the market, a road which usually ends in no offers at all, or very low ones. Smart sellers can combat this tendency by staying fixated on the comparable sales data, and committing to being responsive to market feedback like low buyer traffic or having your home sit on the market for many days beyond the average in your area.
Wednesday, April 10, 2013
71% of bankers say home price increases are sustainable
Lenders are more bullish on the housing recovery now than they have been in the last several years, according to the results of FICO’s quarterly survey of bank risk professionals.
The survey, conducted for FICO by the Professional Risk Managers’ International Association ( PRMIA ), found that 71 percent of bankers polled believe home prices are “rising at a sustainable pace” in the context of mortgage lending risk.
In addition, the majority of bankers—59 percent—expect the supply of credit for residential mortgages to meet demand over the next six months; a slightly larger percentage (60 percent) expect the supply of credit for refinancing to meet demand.
On the credit health side, 39 percent of respondents expect mortgage delinquencies to fall over the next six months, while another 45 percent expect delinquencies to remain flat. Sixteen percent anticipate an increase in delinquencies, making this first-quarter survey the most optimistic since the surveys started.
“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”
According to FICO , banker optimism extended beyond mortgage lending last quarter: Large majorities of survey respondents believe that consumer credit health is improving across most types of loans. Respondents were most confident in home equity lines of credit, with 81 percent expecting delinquencies to remain steady or decrease in the next six months.
The survey also asked respondents about the business priorities at their institutions for 2013. Two related topics took the top spot: utilizing Big Data analytics to gain greater insight into consumers and improving the customer experience. Both were named as the top priority by 35 percent of respondents. Also important: fraud prevention (20 percent of respondents) and utilization of mobile technology (9 percent).
The survey, conducted for FICO by the Professional Risk Managers’ International Association ( PRMIA ), found that 71 percent of bankers polled believe home prices are “rising at a sustainable pace” in the context of mortgage lending risk.
In addition, the majority of bankers—59 percent—expect the supply of credit for residential mortgages to meet demand over the next six months; a slightly larger percentage (60 percent) expect the supply of credit for refinancing to meet demand.
On the credit health side, 39 percent of respondents expect mortgage delinquencies to fall over the next six months, while another 45 percent expect delinquencies to remain flat. Sixteen percent anticipate an increase in delinquencies, making this first-quarter survey the most optimistic since the surveys started.
“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”
According to FICO , banker optimism extended beyond mortgage lending last quarter: Large majorities of survey respondents believe that consumer credit health is improving across most types of loans. Respondents were most confident in home equity lines of credit, with 81 percent expecting delinquencies to remain steady or decrease in the next six months.
The survey also asked respondents about the business priorities at their institutions for 2013. Two related topics took the top spot: utilizing Big Data analytics to gain greater insight into consumers and improving the customer experience. Both were named as the top priority by 35 percent of respondents. Also important: fraud prevention (20 percent of respondents) and utilization of mobile technology (9 percent).
Tuesday, April 9, 2013
Confidence in Housing Stays Strong, but Weakens for Economy
Consumer confidence in the economy is wavering, but confidence in the housing recovery remains high, according to Fannie Mae’s National Housing Survey for March.
“Despite an uptick in concern expressed about the direction of the economy, it appears consumers believe that the housing recovery will march on,” said Fannie Mae SVP and chief economist, Doug Duncan.
The percentage of people who say the economy is on the right track declined 3 percentage points in March to 35 percent. At the same time, 21 percent of people said they expect their personal financial situation to worsen over the next 12 months, a 4 percentage point rise from the previous month.
Despite this increase in pessimism, Fannie Mae found consumers continue to view the housing market with relative optimism. Forty-eight percent of survey respondents expect home prices to rise over the year, unchanged from February’s all-time high for the monthly survey, which started in June 2010.
In contrast, just 10 percent of survey respondents anticipate falling prices, an all-time low for the survey.
Another survey high was reached in response to the home-selling environment. Twenty-six percent of respondents say now is a good time to sell a home, a 1-percent increase from February.
Duncan pointed out that while consumers share a positive outlook on the housing market, they are “cautious.” In fact, their predicted price gains often lag the market.
March is the 17th consecutive month in which consumers have predicted yearly price gains. However, they have continued to predict price gains of less than three percent.
In March, consumers predicted a 2.7 percent price gain for the following year.
“By comparison, main measures of national home prices in early 2013 posted year-over-year gains of at least double or triple that figure,” Duncan said.
About 46 percent of survey respondents anticipate rising mortgage rates, while just 6 percent anticipate further declines in mortgage rates over the next 12 months.
Forty-three percent think mortgage rates will remain about the same.
“Despite an uptick in concern expressed about the direction of the economy, it appears consumers believe that the housing recovery will march on,” said Fannie Mae SVP and chief economist, Doug Duncan.
The percentage of people who say the economy is on the right track declined 3 percentage points in March to 35 percent. At the same time, 21 percent of people said they expect their personal financial situation to worsen over the next 12 months, a 4 percentage point rise from the previous month.
Despite this increase in pessimism, Fannie Mae found consumers continue to view the housing market with relative optimism. Forty-eight percent of survey respondents expect home prices to rise over the year, unchanged from February’s all-time high for the monthly survey, which started in June 2010.
In contrast, just 10 percent of survey respondents anticipate falling prices, an all-time low for the survey.
Another survey high was reached in response to the home-selling environment. Twenty-six percent of respondents say now is a good time to sell a home, a 1-percent increase from February.
Duncan pointed out that while consumers share a positive outlook on the housing market, they are “cautious.” In fact, their predicted price gains often lag the market.
March is the 17th consecutive month in which consumers have predicted yearly price gains. However, they have continued to predict price gains of less than three percent.
In March, consumers predicted a 2.7 percent price gain for the following year.
“By comparison, main measures of national home prices in early 2013 posted year-over-year gains of at least double or triple that figure,” Duncan said.
About 46 percent of survey respondents anticipate rising mortgage rates, while just 6 percent anticipate further declines in mortgage rates over the next 12 months.
Forty-three percent think mortgage rates will remain about the same.
Monday, April 8, 2013
Seller's Asking Prices Move Higher and Rent's are Stable
Asking prices on single-family homes rose in March, while high inventory flattened out rent prices, according to Trulia's Price and Rent Monitors.
Based on data on for-sale homes and rentals listed on Trulia, the monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes and similar neighborhoods through the end of March.
With the spring house hunting season upon us, Trulia reported a 7.2 percent year-over-year increase in asking prices on the national level (8.0 percent excluding foreclosures). On a seasonally adjusted basis, prices rose 1.1 percent month-over-month (1.4 percent excluding foreclosures) and 3.5 percent quarter-over-quarter (4.0 percent excluding foreclosures.
Regionally, prices rose annually in 91 out of the 100 largest metros. Once again, the West made the biggest splash in terms of price growth, with Las Vegas, Phoenix, Oakland, Sacramento, and San Jose showing yearly improvements of higher than 20 percent.
On the other hand, rent price growth—for single-family homes, at least—showed signs of stagnancy in March. Nationally, rent for single-family homes increased 0.1 percent year-over-year.
“Why have rents stopped rising on single-family homes? More supply,” explained Jed Kolko, chief economist at Trulia. “Investors have purchased single-family homes—including many foreclosures—and are renting them out. In fact, the number of single-family rentals nationally has increased by almost one third since the housing market last peak: that’s nearly 4 million more single-family homes rented in 2012 than in 2005.”
On the apartment side, rents rose 2.9 percent year-over-year. Taken together, national rents were up 2.4 percent year-over-year in March.
While oversaturation has hindered single-family rent price growth, it may provide a boost in the purchase market very soon.
While oversaturation has hindered single-family rent price growth, it may provide a boost in the purchase market very soon.
“Rising prices and flattening rents change the math for investors and renters,” Kolko said. “Some investors will decide to sell the units they’ve been renting out, which would create new desperately needed for-sale inventory. At the same time, some renters watching prices rise will rush to buy before prices rise further, but those who don’t will at least get some relief from stabilizing rents.”
3 Myths of Real Estate
As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents' house-hunting experiences. Maybe they've learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized "real estate myths." Here are three such myths that many less-seasoned home buyers and sellers assume are true.
Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn't necessarily the best time to sell a home anymore.
Today, more than half of buyers aren't married, and their decisions aren't based upon school schedules. So spring isn't as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.
It’s a supply-and-demand issue. Most sellers assume buyers aren't seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.
After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn't even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.
There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying "never offer the full asking price." That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.
A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent o understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.
There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.
Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.
A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.
When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.
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