RealTown's RealTalk

Anyhow the point I am trying to make- yet again real estate is local. And some areas are doing well, and some areas are really hurting. At least here the media is just running the national stories, which really don’t represent the entire country. They are showing the worst hit markets and making it seem like this is what the whole country is seeing.

Bruce Paluzzi Replies:   I live and work in South Bend, St. Joseph County,  Indiana, (Home of Notre Dame) a market that also has very slow but steady increases in home prices accompanied by either flat prices or very very minor drops if the national market softens.  Throughout 2007, I was one of those who got interviewed about the market for TV and stated that the dip has not hit our area and shouldn’t.  But I have seen in the last year, and am continuing to see, that the reports on the news are becoming a reality more and more. What I mean is that although there should be no effect on our market because of over-inflated markets, there really is an effect that is unfortunately getting more and more noticeable.  While we do have foreclosures coming on the market….we always have had them, but now because they are in the news so much, buyers are more aware of them.  The word foreclosure is so scary that it has a wide range of affects on the market that don’t seem logical…but are real.  Foreclosures are subject to the highest levels of property taxes in Indiana, much like rental properties, so the only way banks can sell them is to reduce the price. If someone buys a house after march 1^st of 2007, they can get tax reductions (exemptions), but those exemptions do not “kick in” until 2008…and those 2008 taxes are not paid until 2009!   So it is hard for many buyers to qualify for a house payment unless those exemptions are in place.   So how do you sell such a house?  You reduce the price.  So the foreclosure homes must be dropped in price to sell, and the rental properties people are trying to sell off have to compete, so they drop their price…and consequently there is so much cheap real estate out there that the reductions in price are starting to “spread” into surrounding areas where there have not been decreases in value for years!  Now lets add in the less talked about mortgage factors which are the crazy-appraisers and underwriters.  Appraisers are getting hammered for being a part of the mortgage crises, so they are getting more and more conservative and are cutting appraisals left and right.  Underwriters, folks like you and me who don’t want to lose their jobs, are being much more picky in not only the qualification process, but in conditions that arise after a contract is signed. And the buyers out there are eating this stuff up.  In the last 8 months I have seen record-poor initial offers on home, due to buyers hearing the words “buyers market” repeated every day.  While we try to impress on them that a quality house is still going to get quality money…some agents are reporting making a bad offer, then moving on to the next one, because the buyer will wait and get the good deal they feel is out there for them.   When this happens, they eventually stumble upon an over-motivated sellers who delivers them the good deal…so the myth becomes reality. Now it is spreading and the sellers are getting into the game to show how “smart” they are.  They hear it is a bad market, so they lower their price, or at the very least they are accepting deals they never would have in 2005 or 2006.   But they need to move and don’t want their house sitting around for a long time, so they wheel and deal and get it sold.   Well…what do the 10 other houses in the neighborhood do when the neighbors house sold quickly, but at 5% under value?  They all drop their prices. (Some more quickly than others!)  I just sold a listing that would have sold for 185 to 190K. We went on the market in a subdivision with 7 other active and comparable homes that were all priced from 189 to 210.  My seller told me to tell all interested buyers that the wanted the house gone quickly, and would look at anything reasonable.  His neighbors homes have been sitting for 30 to as much as 140 days.  We had our first few showings and we got a 170K offer.  This is a horrible insult because the house is immaculate.   My seller countered at 175 and of course the buyers accepted.   I was floored (but didn’t argue).  But the seller is thrilled and will close on 2-28-08 while I’m sure some of the neighboring homes will be having summer-time open houses. 

So all I am saying to agents is that you can talk all you want to about your area…and claim the national market has no affect on your local market, but I assure you it is.   It’s better to be a realist, especially if you want to list successfully, because sellers need to be told that things aren’t all that bad everywhere…but that they aren’t all sunshine and roses either.  Sellers need to be aggressive because no matter what the sellers or their agents think….the buyers out there are the ones who set the market price, and nationwide they are convinced they are in the drivers seat.

Best Regards, Bruce Paluzzi   BrucePaluzzi@comcast.net   www.243-9999.com