There are several high profile segments of homes selling today. Of course we have the usual suspects:
- Homes listed by real estate agents in the MLS (the majority)
- Homes For Sale By Owner
- Ebay
- Don’t laugh, over 4,364 real estate properties are sold in an average month, mostly unique homes, vacation homes or properties suited for investors. Lest you think that you can avoid a Realtor® and just list your home on Ebay, keep in mind that within the greater picture of 5.18 million units sold nationwide in September 2008, this works out to be less than 1/100th of one percent.
- Mass Auctions
- My company here at Keller Williams has begun sponsoring auctions of land and homes alike. This is an up and coming segment of the current market, a great opportunity for buyers and sellers alike. Watch for more information in future blog entries.
But the fastest growing segment that has been shaking up the party is
How many of you out there think foreclosure properties present incredible opportunities for wealth building? (Raise your hands, don’t be shy). I thought so.
Thus I thought it would be useful to take a closer look at them. Are they really the scorchin’ deal everyone thinks they are? Keep in mind, the following discussion is locally based, and other areas of the country may be experiencing completely different market activity.
Listen closely, it is the sound of bubbles bursting (and opportunity knocking!). First of all, in my experience foreclosures are not being listed for sale at the rock bottom prices you might expect. I believe this is because most of the foreclosed homes were purchased at the top of the market, within the last 3 years, many at 100% (or more!) mortgages. Lenders are stuck with very high positions in homes that simply can’t command the price that will even pay off the note and additional costs incurred by the foreclosure process and holding of the property.
I’ve written offers on many foreclosed homes, and in some cases it takes weeks or months to get a response, if you get one at all. Many lenders hold tens, if not hundreds, of these homes. I recently wrote an offer on a foreclosure that had been sitting for over a year at 84% of the list price. The seller did get back to me in 24 hours. Their response? Nope. Forget it. G’bye. They didn’t even send over a counter.
You might wonder why, I mean, this doesn’t make any sense does it? Wouldn’t you think lenders want to divest of these properties? Well, there are a variety of reasons why lenders might be sitting tight.
First, seven letters. Bailout. Many lenders who are eligible for bailout money are likely waiting to see what kind of package they are going to ultimately get from Capitol Hill. Yes, it is true that most of our local New Mexico lenders were so conservative in their policies that they aren’t even eligible for bailout money, which is one of the reasons New Mexico has so few foreclosures relative to other areas of the country. The largest portion of New Mexico foreclosures are held by The Big Ones, the national companies such as Citibank, Bank of America, and Countrywide. They are eligible for bailout. Until it is clear what that means, many are sitting on their properties, waiting for a buyer, but not just any buyer, one at their price.
Second, market protection. If lenders start letting their homes go for that proverbial song buyers dream of, then it could create a downward spiral of home prices, worsening the housing market in the short term. In short, they hope to keep the housing prices from dropping even more, further reducing their chances of getting out from under their inventory without losing their shirts.
Third, sheer volume. In some cases, there are so many homes in the inventory, lenders don’t have enough staff to evaluate the offers they are receiving, and offers sit unanswered. In other cases, there is plenty of entry level staff to prep the offers in-house, but they do not have sufficient access to the “decision makers”, the people who can actually authorize the sale.
So, if you buy my diatribe thus far, where ARE the scorchin’ deals? Drum roll please.. Top ten survey says…. 1) Grandma’s house and 2) Realtor® represented properties.
Grandma’s house, or more generally put, any home which has been owned by the owner for 5 years or more. The longer, the better the potential deal. These are homes in which the owner has equity to negotiate. They can afford to give you the scorchin’ deal because they are still going to walk away from the table with dollars, and plenty of them. Chances can be even better for deal-age if the home is vacant and the owner is out of state or is being relocated to another state by a company who isn’t going to give them a relocation package which would “buy” their house for them so they can buy another one in their new town. These people are motivated. They have equity, and strong desire (if not financial necessity) not to have two mortgage payments, and they can give their equity to you, in exchange for being the only house in the neighborhood to sell this quarter.
Why a Realtor® represented property? Because the majority of people who list their home For Sale By Owner have an emotional idea of how much their house is worth, which is typically higher than the market value. For Sale By Owner properties are typically overpriced, that’s partially why 88% of homes originally attempted for sale by owner ultimately end up listed with a Realtor®. When a Realtor® is involved, he/she can help the seller evaluate the offer properly – by providing the seller with an estimated net of cash after closing costs are paid, and helping the seller to understand what is happening, truly, in the marketplace, so they have not just an emotional idea of the value of their home, but a viewpoint based on the cold hard facts, only available as sales statistics from the Multiple Listing Service (Greater Albuquerque Metropolitan Board of Realtors). Buyer’s have an advocate in a Realtor® represented property. The seller’s agent is, of course, looking out for the seller’s interests solely, but the seller’s interest is ultimately to sell the house for most desirable terms for the seller. “Desirable terms” is most often interpreted by buyers to mean price, but for the seller, the more desirable terms could be a quick closing with cash or pre-approved funds. A good seller’s agent will do his/her best to ensure that negotiations continue until either a meeting of the minds is reached, or it is absolutely clear that such a meeting is impossible. The intent of the seller’s agent is full and complete advocacy for the seller, but it is indirectly also advocacy for a buyer who comes in with a lowball offer, trolling for the deal of the century.
The deals are always there, no matter the weather, but it takes a little research and elbow grease to find them. Having a good Realtor® helps too.
