A couple of years ago I did a little three part series answering some thoughts that many first time home-buyers have. Of course, all new home-buyers don’t have all of these same thoughts during the buying process, but most have at least one or two of these. Be sure to check the original posts for more details.
Two years ago when I wrote the original post, the market was a lot weaker than it is now. There was a LOT more inventory, and the sales were actually a bit lower than they are now. In most of the segments where there is first-time home-buyer activity (Under $200k, mostly), absorption rates are running 4½-7 months. In that range, anything under 6 months is considered strong. So, while there is still a perception among buyers that they are in complete control, that isn’t necessarily the case.
Of course, there is still some buyer power… but it isn’t on the “best deals” (I actually mean cheapest advertised prices, which may or may not be great deals). Bank-owned properties are flying off the shelf. If you think you like it, get the offer in. If it is owned by a person rather than a corporation, there might be more leverage, but if they are pricing it in the trenches to compete with the banks, then the same rules apply.
OK, in all honesty, this one isn’t limited to first time buyers… This is a HUGE issue for a lot of buyers. It is subsiding a little, but only because it is easier to see all of the options. But even with that going for buyers now, there are still a lot that are missing out because they just want to “look at a couple more houses”. As a Real Estate Agent, I understand. But I also HATE making the call to a prospective buyer telling them that the house we looked at last week, the one that they REALLY wanted, is under contract.
I encourage buyers to look at houses. But, at the same time, I have to remind them that when they see the house they think they want, delay can mean loss. Maybe not such a problem if it is wildly overpriced, but if the price is fair, take the shot. There might not be another chance.
Ask any real estate agent and they will tell you that they have heard that line before. Every once in a while, it’s true. Usually the deal falls apart when the “little issues” start getting added up. And let me tell you about some of the little issues that I have come across…
- $50,000 worth of mold remediation
- $20,000 roof replacement
- $15,000 AC system replacement
- $45,000 in structural deficiencies
- $70,000 for water damage
- $100,000 in complete interior renovation (that was on a house listed for $75,000 in a neighborhood where houses without the interior issues were listed for $100,000 to $125,000)
If they don’t go sour with just a closer look at the actual costs to deal with the “little issues”, then they generally fall apart during the inspection. And for first-time home-buyers, they usually should fall apart.
There ARE some great deals in the market, but they are seldom the house advertised the lowest price. And even when they are, keep in mind that they will usually require a major infusion of cash right after closing and before they will be ready to move into. Of course, there are FHA 203k loans (and I have a mortgage broker that can hook you up with one of those) but they aren’t the magic bullet…
Working with an agent that understands more about the house than whether the drapes and carpets match is a pretty solid start. You know where to find me.
- Wayback Wednesday… An Oldy, but a Moldy (lanebailey.com)