I know that you know it’s a buyer’s market out there, right? I’ve said it a bunch of times. It’s also a declining market – that is, property prices are, broadly and generally speaking, declining. In a market like this, you’d think it’d be pretty easy to buy a house, right?
Think again. While C.A.R. puts out its advertisements saying that the selection of homes is great right now, you have to take that with a grain of salt. First off, the selection really isn’t that great. It terms of “days of inventory” there may be an historically average selection of properties. But the problem here is that most of those properties aren’t really in the market.
They may be on the market – that is, listed for sale and available for purchase, but their asking prices are way too high for the current state of the market. Or, if their asking prices are reasonable, more often than not, it’s a short sale, which means that the contract and price are subject to approval of the one or more lenders which have loans outstanding against the property. Given that these “short sales” often take a very very long time to gain the approval of the lender’s loss mitigation department, it’s difficult to say that these properties are really “in the market.”
So what does that leave? That leaves bank-owned “REO” foreclosure properties (not all of which are actually priced to sell) and those few not-overly-encumbered homes with enlightened sellers who realize where their homes need to be priced in order to actually be in the market and have a decent chance of selling.
So when you look at homes that are actually in the market and priced right, there really is not a good selection of these kinds of homes. For these kinds of homes, though, there is tremendous demand. I put an offer in on a property last week, for example – we didn’t get it, even though our offer was pretty decent. There were ten offers on the property, and someone came in there and hit it out of the park and got the property.
Sigh. It’s like 2004-2005, all over again – because, really, the right-priced properties sell very quickly still, often with multiple offers. If you’re in the market to buy today, the same rules apply for making an offer as applied back in the good ol’ days – weak offers get batted aside and only the strong survive.
Now, here’s a tale of two sellers. I have one seller who got an offer on their place. The buyers had the effrontery to ask that the seller pay for Section 1 termite repairs. The gall, I thought. This is Santa Cruz. We don’t do that here. But in a market like this, if ever there was a time to try and get the seller to pay for Section 1 termite work, this is it. This tactic only works when there are no other offers on the table and demand for a particular property has shown to be only warm instead of piping hot. As it happens, this is the only offer we’re working with right now, so we’re going to take a long hard look at them section 1 repairs.
Now I’ve got another seller. It’s “the bank” – an REO property. Three offers on it in a week. Before one of the buyers was chosen, I went over the terms of the counter offer the bank was thinking about making. “Now, let’s be clear,” I said. “This property is being sold as-is. Under no circumstances will any credits be given or repairs made. Is your client aware of that and accepts this?” The buyer’s agent replied: “Yes, my client knows that, and that’s fine.” And then today, I got the phone call, “Well, the buyers are going to ask for some credits to repair some of the stuff that came up on the home inspection…”
That’s fine. That’s a complete waste of time, but it’s fine. Why is it a waste? Beyond the fact that the seller, a bank, already said it was an as-is sale and no repairs would be made or credits issued for same, there’s another salient point: there were three offers on the table. We got them in a week’s time. What does that tell you, in a market like this? Two things: the price was low, and demand is high for this property at this price. The bank doesn’t need that particular offer. It accepted the offer, with the understanding that the buyer wouldn’t turn around and try to nickel-and-dime them over repair items. But in a multiple-offer situation like this, any one buyer really is holding the weaker hand.
But go ahead and ask for your credits, if you’ve got the time to waste. Otherwise, suck it up and complete the transaction, or move right along. For right-priced properties, another ready willing and able buyer will be along shortly – and you need to know this when you’re negotiating.
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