Today's Real Estate Market: Home Buyers and Home Sellers
Since the economic downturn of 2008, the real estate market has been challenging for REALTORS and buyers and sellers. For those who have cash for a home purchase, or can obtain a mortgage, there has never been a better time to buy property. Real Estate is, and will remain for some time, a buyer's market.
Sellers are still adjusting to this shift, and need to be realistic about what this means when they are preparing their home for the market.
I am going outline both the home buyer and home seller perspectives in this article so that both sides can gain a clearer view of the tenor of the present market.
Home Buyers: What are They Looking for in the Current Real Estate Market?
Since buyers are now a select group with ample choices, they can afford to be picky about the properties they purchase. Today, I find that many of my buyers want to walk into instant equity in the home they purchase. There are opportunities to buy short sales or foreclosed properties where the purchaser can walk into equity -- providing the property is in good shape. Most of the time these types of home purchases will need updates and/or repairs.
Home buyers wishing to obtain ‘instant equity' in a home purchase need to prepare themselves in two ways. First, a down payment of 5-20% will be required depending upon the type of loan they qualify for. Home buyers also need to make certain their credit scores are high enough to obtain lending approval.
Those buyers who prefer to purchase properties that are not bank owned will want to make that purchase based on a current appraised value. A savvy home buyer will look for a property in pristine condition. This type of buyer will most likely expect to move in and not have to perform any work on the property. These types of expectations are especially true for real estate purchases where individuals are downsizing from larger to smaller homes.
Even though some states may not require it, buyers will insist upon home inspections before purchase. I advise my home buyers not to get too caught up on the cosmetics of a property (i.e. rugs need to be replaced, holes in the dry wall, wood rot on the railing). These minor issues with a home are easily fixable. I encourage home buyers to focus on structural integrity of the home instead. This means the plumbing, electric, heating, air conditioning and roofs must be in good condition. These aspects of a home affect the integrity of the property, and require time consuming and costly repairs. Remember that some FHA and VA loans will not approve mortgages unless the home is structurally sound.
Nowadays, home buyers cannot count on owning a home and selling it a year or two later. A home purchaser should plan on owning the property for three years or longer, even if it has to be turned into a rental property. Today's real estate purchaser has many more demands than a buyer did three or more years ago.
Home Sellers: It's Time for a Reality Check
On properties for sale where I am the listing agent, I advise my sellers to return to the traditional strengths of a property. If a seller truly wants to sell, he or she must evaluate current pricing, location and condition.
Pricing a Property for Sale
There is no doubt about it: price is the defining criteria of real estate transactions today. Most cities and counties have raised the assessments over the last five years. Presently, these assessments are often equivalent to current appraised values. This is not good news for many property owners, who have lost equity in their home.
In many real estate markets, short sales and foreclosures are sold near the property listed, and appraisers have to use these comparable sales in approximating the value of a home. Sellers should NOT be surprised if an agent asks them to price their property below current assessed values. Fulfilling this pricing request will be necessary if there are multiple foreclosures or distressed properties in their neighborhood or homeowners have sold their properties at lower than market value out of necessity.
When I ask a home seller to lower his or her price, he or she is often inclined to take this personally. It is just like I told the seller his or her children are ugly and the grandchildren will be ugly, too. Home sellers: it is time for a reality check. Do not take the suggestion to lower a selling price personally! I know when a house is priced correctly because there is a peak in interest measured by an increase in inquiries and showings. If a home has been on the market for three months or more, and it has not been shown, it is probably overpriced.
Selling a Home in a Convenient or Popular Location
Do not over improve a home for the neighborhood. Home sellers must remember this cardinal rule of real estate: your home does not need to be the biggest and best, but it is certainly beneficial to be around the biggest and best. If a property is close to a metropolitan area, or in an upscale subdivision, more buyers will want to purchase it. Premiere locations should be reflected in price. If a house is 25 minutes outside of town and it takes a half hour to reach a store, the amount of time a home spends on the market will most likely be longer.
Sellers: Take a Critical Look at a Home's Condition, and Make Improvements
The first impression a buyer receives of a home is a lasting one. Landscaping does not cost a great deal and it is well worth the investment if you are selling a property. Curb appeal encourages buyers to get out of the car and into the house. Plant flowers in the garden. Put a wreath on the door. If a home has old orange shag carpet and green laminate countertops, this will be reflected in the pricing of the home. Put some money into improving the property. If a seller is really serious about closing a home sale, then he or she will want it to stand out above the rest.
Sellers have come to expect reimbursement for upgrades and improvements. In this market, things are different. Remember, the buyer can afford to be picky. Complete upgrades on the property in order to make it more enticing, and to help the home sell quicker. But -- do not expect these upgrades to increase the price of a property. The more dated a home is the longer it will sit on this real estate market. A buyer can just as easily purchase a bank owned property that needs improvement, for a lower price. This is a price driven market. Make your property easier to sell by completing improvements before it goes on the market.
Where do Home Buyers and Sellers Meet?
There are excellent houses on the real estate market and some good buys right now. If both parties are willing to negotiate and be reasonable, they will inevitably reach the closing table. A vacant home with mortgage payments, taxes and utility expenses drains monthly incomes and financial reserves. Owners who have had a home on the market for some time need to seriously consider dropping the price $5,000-10,000 to complete a sale, rather then bleeding money every month.
What to Expect When Closing a Sale in Today's Real Estate Market...
Since down payments are now required, home buyers will usually ask for closing costs to be covered by the seller. If the seller is not in a position to cover all closing costs, I recommend they at least offer some sort of assistance. If the house is sold as is, and the home owner does not plan on doing any improvements – be prepared to negotiate price.
The current real estate market requires more work on the part of the seller, and buyers have become choosier in the properties they do purchase. Remember these suggestions when you put your home up for sale, and your home will be more inclined to sell within the first six months.
Elaine VonCannon, is a REALTOR, Notary, Team Leader, Property Manager and an award winning agent in the RE/MAX Hall of FAME. Visit www.estatesinvirginia.com or www.voncannonrealestate.com for residential and commercial listings in Williamsburg, James, City County, New Kent County, Richmond
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