It’s been a very busy April & May. What I’m seeing is that homes in the $300,000 – $500,000 range, which consist of many distressed REO, Short Sale, and pre-forclosure homes, mostly ~1,000sf 2-3 bedroom sfr, are moving hot and heavy.
Recent bids my clients have made faced 10, 12 and up to 20 competing offers. Sure, some of the competition is low balling and fishing, but in my humble opinion, it’s getting a bit late in the game to do that (although if it makes them and their agent happy, they can do it all they want).
There’s two groups that seem to be out right now. First time home buyers who are perhaps struggling to get into their first home and mom-and-pop-investors. The mom and pop’s are going in with substantial amounts of money. In many cases they are playing with all cash.
This puts alot of pressure on the first time buyers who are struggling to meet the 20% (or more) down payment requirements.
All is not lost for first time buyers, though. If they have an agent who understands the market and is willing to work hard and strike fast for them, it can still be done. Everyone needs to be realistic about the market, though. I don’t mean throwing away silly money. I DO mean if you’re like a competing bid we faced that bid $350k on a home that was listed at $430k and sold near $500k you’re dreaming and wasting your time.
More than ever fundamentals apply:
- Keep your credit squeaky clean. If you want to buy a home, now is not the time to slip on a payment.
- Don’t buy luxuries until AFTER you buy your home (no cars or furniture on credit!)
- Location, location, location!!!! If there’s *** anything *** buyers should have learned from this cycle, it’s to see how fast homes in poor locations dropped, how much further they dropped, and how long they’re taking to come back.
- Do your own homework. All the tools are at your fingertips. The internet is so powerful now. You can check schools, neighborhoods, and home comparables online. Insist on making your own inspections, even if you are planning to remodel. It’s under a thousand dollars (often much cheaper) to get both pest and contractor’s inspections and I wouldn’t buy a home without doing it.
- Read your contracts. Make sure you understand your contracts. Read them again. Timeline your deals. Agents are good. Some agents are excellent. Still, you should make sure you handle *your* business. Right now, especially with distressed properties, there’s new rules, changing rules and some (banks or lenders who own properties) making up and adding their own rules in. If you agree (contractually) to do business with them and buy their home, there are many concessions you may be agreeing to. Not every deal is the same. In fact, if you get an agent who tells you not to worry all deals are the same, then you better think twice.
- Working with distressed properties is not evil, but it IS different. There were always a few agents who used to get their clients into contract and making demands on their behalf afterwards. I’ve never believed in doing that as part of the deal making process, as to me it’s a bit dishonest and unethical if you go into an agreement without intending to honor the original agreement and have an agenda from the get-go to make demands later. Sure if you find in the course of your inspections that you are looking at $20,000 in termite damage or something AND your contract stipulates that you have an inspection contingency then you need to do what you need to do. But some agents used to take their clients into a deal and say “we’ll get you another $10,000 in credits later”, that’s not good.
Banks are having none of those shennanigins and are making quite clear. Everything is to be negotiated beforehand, the contracts written once, and then everyone follows the contract. I for one, appreciate that. Everyone is clear. Everything is above board.
Bottom line is if you are a first time buyer and have been getting ready. It’s a good time to move on it. Get a great agent who returns calls promptly and knows the market. Don’t let yourself be discouraged. If you’re looking at distressed property look beyond the stained carpets and minor damage and see the house for what it can be. In the end you can be a homeowner. Good luck!