You’ve been punched. You’ve been cajoled. You’ve been dismissed out of hand as a serious contender. Your corner wants to throw in the towel, but it’s time to look deep inside yourself for that fighting spirit. This is your Rocky moment, and I’m your Mick.
Tempting as it may be to utter “No mas,” in the face of a younger, stronger foe, you as a home seller have your own strengths. Yes, the bank properties have been hammering your rib cage and battering you with low blow after low blow for the last eleven rounds. Every time you regain your composure, another steel-fisted uppercut in the form of a new REO listing shatters the ineffective “pride of ownership” cup upon which you have been so dependant. The referee and the fight doctor are scrutinizing that nasty gash above your eye to determine if you are still able to intelligently defend yourself.
You’re seeing triple, you say? Buck up, Rock, and hit the guy in the middle.
Now that the free-fall in property values has seemingly arrested (much like the hearts of many homeowners this year) across several segments of the local Scottsdale Real Estate market, would-be sellers can take a deep breath and catch their second wind. Even if they are still leery of making the price jump from distressed properties to resale properties, buyers are back in the market. Several straight months of increasing home sales, decreasing inventory and even modest median price increases (really?) indicate this. That’s the good news. The bad news is that most of these buyers are still purchasing the goods on the ground floor (sporting goods, evening wear and foreclosed Real Estate) while the typical mom & pop seller continue to be priced on level four.
Before resale homes start selling at a higher rate, their prices still need to drift a little further South. This is not news. You’ve been pummeled with this unwelcome assertion for the past year. My intent is not to rabbit punch you with the obvious on this day. I’m offering a momentary reprieve from the infernal pessimism (which I have admittedly dispensed with impunity). No more defeatism from your corner, it’s time to talk strategy.
Yes, the bank-owned property on the far side of the ring is a fearsome opponent, but skill and guile can slay the relentless beast. You’ve been getting drubbed over the course of this bout because you are not offering your bigger foe any angles. You’re simply turtling up with that ridiculous price of yours and accepting a merciless beating. To change the tide in this lopsided affair, yes, you do need to get a bit more competitive with your price. Until you get inside the freakish reach advantage of the banks, you’re rope-a-dope tactics will just get you roped and doped.
This is not to imply that you need to match the price of the distressed properties, you simply need to vie for the same buyers. If the banks are on the ground floor, you need to get down to level two. If you can at least mitigate a portion of the huge price disadvantage you face, you have a puncher’s chance to sell your home. Here’s why:
The bank property across the street will convey to the buyer in “as is” condition. You have maintained your home over the years and will make any necessary repairs, within reason, to appease a buyer.
The bank property across the street will come with a grand total of zero disclosures. You will provide a potential buyer with a Seller Property Disclosure Statement, Insurance Loss History Report and any other appropriate documentation to give a certain level of comfort to the new owner.
The bank property across the street may not be able to be financed by a buyer due to its condition. Because you have listened to your Realtor and whipped your home into tip-top shape, you will face no such problem. Right?
The bank property across the street may require a buyer to order utilities turned on in their name (and pay any applicable deposits for said service) in order to inspect the working components of the home.
The bank property across the street may ultimately attract multiple offers at its supremely low price. This can benefit you in several ways. For starters, the ultimate sales price is often driven higher than the list price in such scenarios, thus making your case for higher neighborhood values. Secondly, there will be despondent losing bidders for that property that will look, perhaps to you, for alternatives. Lastly, some buyers will become disenfranchised with bank properties after having gone through this multiple offer scenario several times. Eager for less competition and an honest negotiation, some just might set their sights on the slightly higher priced property that can be negotiated downwards instead of upwards.
So there you go, champ. You are far from a hapless tomato can against the oversized Palooka who has been doing the Ali Shuffle all over your face. He’s a one-trick pony. Take away the huge price haymaker and the kid is a regular Glass Joe. If you have the moxie and the wherewithal to get your price just a bit closer to the bank’s, you have the arsenal to pull off a stunning upset and walk out of the joint with the title. The title of “former homeowner,” that is.
Now put your mouthpiece back in, get off that damn stool and get in there and fight!
By now, even the most procrastinating of first time home buyers understands that the end is nigh. The end of the $8000 first-time homebuyer tax credit, that is. While rumors abound about a possible extension past the current deadline, rumors also persist that man did not actually walk on the moon in 1969 (if you happen to believe the latter, you can moonwalk your way right out of my blog catalog). When it comes to our esteemed legislative bodies, I am not ready to take the leap of assumptive faith that they will do the logical thing. As things stand, you have received sufficient warning from every warm and cold blooded Realtor type in the land that you need to get on the stick immediately. With new appraisal regulations and loans which used to take 30 days now bogged down in underwriting quicksand, it is not a good idea to venture past mid October before pulling the trigger on that home you have been patiently watching for just one more price reduction. With a fleet of fellow procrastinators waiting until the absolute zero hour (closing prior to 12/1/09), there is also the added risk of running into title company soup. Think the end of the month is busy at your friendly title company and subsequently hectic in terms of getting your deal closed? My hunch is that typical happenstance will be a walk along a tranquil beach in comparison to the buyer tsunami that figures to crash upon every escrow office near you between 11/1 and 11/30.
But these are the things you already know. Just like you already know that the credit is not reserved solely for first time buyers, but also those who have not owned Real Estate within the past three calendar years. This information is so readily available that I haven’t even bothered to write about it before now. At great risk of being the guy who runs into the empty room to yell “Fire,” I do believe there is one more wrinkle that needs to be discussed. With the deadline steadfastly approaching (just because it looms closer, doesn’t mean the pace has suddenly morphed to earn “rapidly approaching” designation, now does it?), lost in the prodding for first-timers to buy now is any discussion as to the kinds of homes you should be considering. I shall rectify this egregious oversight now.
Earlier in the year, the Real Estate world was your oyster. REOs, short sales, HUD homes, auctions … bring them on. As long as you wrapped up your purchase prior to December, you were golden. Thus, you had the ability to trawl every last oceanic trench to scrape up your sunken treasure. It probably didn’t take long to realize that the biggest finds, those Titanics of the Real Estate deep, were teeming with sharp-elbowed and deep-pocketed prospectors. Basically, you with more purchasing power. Every time you made a play for a new bank property, you and your FHA-fueled dingy were left eating the wake of 50 foot conventional vessels and staring into the live canons of the scourge of the first timer’s sea: cash buyer pirates.
Resigned to the fact that your 3.5% down and government-backed loan vehicle is not a fair fight against the types of buyers that the best values attract, you most likely started looking at resale and short sale properties. Resales have been tricky because most sellers are not in a position to compete with the banks. Many that you would be interested in continue to be priced out of your affordability.
Now you may be thinking that short sales are the way to go. The bank wants to offload a property that is in default without incurring the expense of foreclosure. The seller just wants out and is not motivated by profit, thus creating a tantalizing asking price. Sure there are only a couple months left to close on a house to secure your credit, but this listing says they are using a “Certified Negotiating Specialist.” This other one says they have a 95% success rate! Another even says that they are near bank approval!
Don’t do it.
I know you have gotten your teeth kicked in on the bidding wars that erupt on the bank properties, and the resale market is still too pricey, but short sales are not the way. Not now. If you had submitted an offer on one several months ago, you would have a shot, but I am telling you right now that YOU WILL NOT RECEIVE YOUR $8000 TAX CREDIT IF YOU WRITE ON A NON-APPROVED SHORT SALE LISTING at this point. It is quite typical for the process to take 3-6 months, and the resolution is far from a sure thing.
Keep looking at the bank properties, but reset your sights a little. Great values are still out there. You can lock one up that isn’t priced so stupidly low that every buyer and his pet chimpanzee show up to vie for it, driving the price into the stratosphere. Some of the best buys made right now are actually the ones with list prices that aren’t necessarily the most attractive. When banks, just like typical sellers, miss that sweet spot, you have a better shot at negotiating the price lower versus bidding the stupid cheap one up.
This is also not a bad time to take another hard look at the resale market. Sellers of properties that will fit the budgets of first time buyers should be receiving advice from their agents right about now that they really need to get competitive if they are to capitalize on the last minute purchasing rush. Granted, many sellers simply are not in a financial position to lower their prices, I have noticed more and more resale listings working their way into my searches.
Finally, I would be remiss if I didn’t caution that the tax credit should not be the be all and end all for your purchasing decision. If you simply cannot find the property you want at a price you can afford, don’t get caught up in the frenzy. The worst decisions are often made in the face of such artificial pressure.
But if you are ready to take the plunge, find yourself a property in which the seller can give you a thumbs up or thumbs down within days instead of weeks. Walking the short sale plank with less than 90 days to get it closed will net you an $8000 cold shower.
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Paul Slaybaugh is a father, Realtor, writer, jiu jitsu enthusiast, and occasional flaunter of child labor laws