Friday, June 28, 2019

Instant Buyers?

The latest in real estate are these so-called "instant buyer" programs from companies like 'Open Door'. I find it fascinating how this concept is tracking beyond the 'I have to sell fast' crowd. It is important for a home owner to understand that an investor takes on a great deal of risk when they buy a house with the intent to resell at a profit. This will come at the seller's expense.

I am genuinely shocked to see a rise in this kind of business. again, they serve a purpose for someone that has to sell quickly for whatever reason, new job far away, death in the family, etc. Sellers that are simply motivated by the ease and convenience of not having people look at their home are giving up a large sum of money for that convenience. Some may feel like they are getting a better deal through the "instant buyer" programs, that is highly unlikely especially in Washington State.

When a house is sold the State of Washington collects an excise tax of 1.78% from the seller. If the buyer is planning to resell the home in the near future, which is the intent of most operators of the instant buyer concept, they assume all the market risk and will have to pay that 1.78% excise tax again. Many of these programs have a 30 day closing and during that time they often attempt to sell the contract to purchase to a third party, thus gaining a fee and no exposure to market risk or costs to resell. All of this comes at the expense of the seller.

In order for the instant buyer to work for the buyer they need to acquire the home at a price at the very least 5% under market. They typically levee a fee of 5% to the seller and then the extra 5% would cover selling expenses should they be unable to sell the original contract to a third party. Few people with the resources to pay cash for any quantity of homes would be willing to do so with such a tiny profit margin.

My experience is that they acquire the rights to buy at more like 15% under market. Why on Earth would a seller not under any duress to sell, want to do that? A traditional real estate arrangement will be much better for the seller. These instant buyer or sell guarantee offers are geared to protect the buyer, NOT the seller. The fall back guarantee price will likely be well under actual market value.

Sellers can negotiate with listing agents in Washington State. If money is tight then negotiate a lower fee. Sometimes if the property is desirable, realtors® will compete for listing and the seller could easily make $10-20 thousand MORE than these "easy" instant buyer deals. Yes, the seller will have to clean the house and allow agents to bring buyers in for a tour. Seriously though, if you own a $300,000 house it is unlikely you make enough money to turn your nose up at $20 grand for what amounts to a little bit of inconvenience!

Seller beware, these "guaranteed deals" often do not pass the sniff test.

Friday, June 21, 2019

Interest rates favorable!

Recent market conditions have managed to push rates back down again to two year lows. Buyers should be cautious when looking at online rates as they often reflect a national average and regional rates vary considerably. The Pacific Northwest region is generally higher than the national average by as much as a quarter point. That said, rates are at two year lows right now and that means buyers have just gained some purchasing power.

With rates nearly a full point lower than this time last year, a buyer that qualified for $300,000 last year can probably get closer to $340,000 this year! Housing prices have NOT gone up that much over the last year so this is a huge positive for buyers.

Just to be clear, if a buyer was quoted a 5% rate last year and qualified to buy a $300,000 house. That same buyer will qualify for a $337,000 house at 4%. Year over year that $300,000 house last year would sell for maybe $310,000 today in our local market. Home affordability is better this year than last year due to the rate value exceeding the appreciation value.

All buyers that were frustrated with conditions in the last couple of years ought to get back in the game before the market reacts to the lower rates and prices start heading up again. For now, prices are stable, inventory is decent and rates are low. This is a window of opportunity that may close soon.

Friday, June 14, 2019

Top of Housing Range is still on the Brakes

Locally the real estate market continue to apply the brakes on properties listed at 120% of median or more. Below that threshold there is not much available in the new construction so those median and under price points still see a lot of activity. Up higher in the price ranges things are crawling with price reductions and a strong move towards a buyer's advantage. This is one of those moments in the market place where a seller of the median or lower price point home can sell high and then go beat up the seller of a more expensive home. These market opportunities to move up and save are rare coming around every few years during transition phases like we have right now.

If the Washington DC is successful in keeping the Federal Reserve on a low interest track we may see this opportunity vanish. I cannot overstate that a seller with a house fairly priced under $350k will probably get multiple offers and/or sell quickly for full price and then can take that equity and apply it towards a high priced home in the $500,000 range and find far less seller resistance to discounts. The market can do several things among them the most likely path is a continuance of the seller's market strength at the entry level and neutral to buyer's market conditions the higher up the price range you go. But the gap could close and new buyers riding low rates could put pressure back on the higher ranges tightening the top of the range back to neutral or even mild buyer's favor. Or the market could slide further and start eroding the entry level should interest rates start moving up again. In either case the incentive for an entry level homeowner to sell and move up to a larger more expensive house is very strong. Sellers in the upper end are in a less obvious situation and will have to make a call on what the market may or may not do.

Sellers of larger homes are in a tough spot right now. Builders are producing large family style two story houses that compete directly with older resales. Those looking to downsize are in a tough spot as buyers are in control on the upper end large house market and sellers rule the bottom. Pricing in the upper end does not appear to be contracting, but rather just riding the brakes with nominal appreciation and that has led buyers to lose that sense of urgency.

Buyers at the entry level however must remain vigilant because there is far less inventory under $400k than there is buyers and that means a well priced small ranch house in the low $300's is gone before the ink is dry on the listing forms.

The real estate market is rarely in sync at all levels and neighborhoods, so staying in contact with your preferred professional Realtor® is always wise advice.

Friday, June 7, 2019

Market is Just Minding its Own Business

The real estate market locally in the Portland-Vancouver Metro Area is rolling along fine, just going about its daily business. It is neither crazy nor slow but just in a word, healthy. Listing agents are starting to whine a bit about things as buyers are less likely to bust down the doors with a fists full of offers. Buyer's agents are sighing with relief as now they can relax and let their clients take more than a few seconds to decide whether to write up a house or not.

Friends, this is a healthy market. Sellers actually have to "sell" their homes, and buyers can be a little more discretionary with their purchase choices. That doesn't mean the market won't go nuts if a well priced home that checks all the boxes, so to speak, pops on the system. No good deal goes unpunished ;) Some sellers are still testing the conditions with their overpriced listing and most of the time for the last several months they have been met with a long and rather convincing 'silence' from consumers.

The media loves bad news and this relative slowdown has them frothing at the mouth like rabid animals. They want to say "the party is over" but our local economy continues to churn out new jobs, better pay, and perky consumers. This bodes well for real estate as these are conditions that support a healthy real estate market. Crazy periods of rapid run up in pricing is not sustainable long term and this is playing out now as many buyers are slowly getting priced out of our area. Thousands of new apartments have been built in Portland and Vancouver and that has led to a little less tension in the purchase market.

So is it a good time to buy or sell a house, once again in a word; YES. In fact these neutral market conditions are well suited to both buyers and sellers. This is a time that neither side needs to feel excess pressure and that is a good thing.