Friday, June 6, 2014

Sizzling Summer is Tricky for Buyers

Things are really starting to get healthy for this real estate market. For the last 18 months I have been talking about how the bottom has really gained traction. The entry level market transitioned to a seller's market a little over a year ago locally. I have said that a healthy bottom will feed growth to the middle and then up to the top. Thus, summer 2014 looks strong for the middle market as well. Even the lower part of the top of the market $500k-$750k is seeing much needed activity. High end homes are still a buyer's market but things are starting to equalize. Under $300k is a solid seller's market.

I have noticed that many buyers have not quite made the transition with the market. Some buyers are still out there making low ball offers on well priced entry level homes. From late 2009 till mid 2012 buyers could really beat up a seller on price. That ship has sailed my friends. Buyer's in the under $300k market, (notice how I am saying under $300k now instead of under $200k like I said last year), will need come in strong with offers on well priced properties. It is imperative that buyers find an agent they like and trust.

There are some overpriced listings in the market. Some sellers are trying to squeeze a little extra out of the hectic environment in the entry level to low-middle market. A good Realtor® will be able to identify an overpriced listing and convey an opportunity to go soft on price. That same agent will caution a buyer to come in strong when the property is well priced.

I have worked with buyers recently that failed to follow my advice and lost out on great opportunities. These were buyers that were either referred to me or ad calls. They didn't know me yet, so they had not built up a high trust level yet. There was one particular instance in which the buyer refused to pay full price. The home was listed well under 200k. There was literally a conga line of buyers walking through this house. We had to wait in line to view it and others were waiting behind us. That my friends should be your first clue! The buyers loved it. They even brought the whole family to check it out. They needed help with closing costs so I advised them to come in $5k over asking and then ask for a seller paid closing cost credit back to full price.  They could not bring themselves to pay full price. They offered $3,000 over with $5,000 back. There were four offers and none of them netted the seller the full price (all were close) and the listing agent told me they were steadfast on getting net full price. An opportunity for highest and best went out to all bidders. I told my buyers they have a rare second chance but now they would need to come in even stronger. $7k over with $5k back. They held firm with their original offer. They did not get the house. Had they offered the $5k over with $5k back the first time around, they would have got the house. The seller would have taken it because it netted the full priced and the other four offers did not. Once it went out to highest and best the seller ended up getting more than full price. Some buyers need to get kicked in the teeth a few times before they realize that the market is brutal and there are more buyers than sellers in the under $200k price range.

As I mentioned above, their are some overpriced listings even in that coveted sub $200k range. I have another buyer that is in contract on the townhouse I listed for him. I know this young man well and we have a strong trust among us. I sold him that town house a few years ago. He has been struggling to find an ideal home. There was this one house that we looked at that was just a bit overpriced $198k. Great little house, nice location but operative word is "little". After beating the streets for several weeks we came back to the overpriced listing. The buyer really liked the house it had everything he wanted and needed but at $198k it was just too spendy. I told my client we have an opportunity to squeeze the seller on this one. We came in net $10k under with an offer of $192k with $4k in seller paid closing costs. Seller countered two grand higher and we are in contract!

There are many fine real estate agents out there that understand the market. Buyers are well advised to talk to several potential agents and choose the one they feel is looking after their best interests. There are also a lot of lazy agents that don't want to take time to show homes. Buyer's should not hire a pushy or lazy agent. When they find an agent that will show properties and identify the overpriced properties from the well priced properties, they should stick with that agent. The biggest takeaway should be this; when a buyer finds a house they really love...their dream house, if you will, they ought not take a risk with a soft offer, come in strong and get that house!

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