I came across a post today by Jessica Horton titled, I may be a real 'twit', but I won't ever try to scare you into buying. Jessica writes about how she won't scare her clients into buying now simply because of the $8,000 tax credit. It was a good post and I enjoyed it, so much so, it inspired me to write my own post.
While Jessica's post was written from her perspective of a Realtor in Georgia, the perspective of an LO here in SoCA (specifically Los Angeles & Ventura counties) is quite different. One of the things about Jessica's post that I really liked and identified with was her comment,
"Consumers making decisions from a position of strength is what will help improve our economy...".
So true Jessica and I couldn't agree with you more.
In the past few months, I've been noticing a rather disturbing trend among some of my clients and their escrows - they don't like the property they're buying! Some have actually hated the property they're buying and are actually dreading the close of escrow.
Yes, in some cases this may just be a case of buyer's remorse but for others, it is most certainly a bad decision and one made from a position of desperation. This is very sad folks and I feel sorry for these people for feeling that this is what they have to do in order to please all the people telling them to hurry up and buy something - anything but just hurry up and buy now.
I hear the stories from my buyers of how they feel pressured to hurry up and buy something or they'll lose the $8,000 tax credit. I hear their stories of how they feel pressured because they don't want to write an offer on every run-down, dilapidated dump they see. I hear their stories of how they feel pressured to waive all of their contingencies, which very well set them up for some sort of heartache later on in the transaction.
I hear my buyers stories of how they got caught up in the whole bidding war frenzy and how the only reason their offer got accepted was because they overbid everyone else - to the point that the property won't appraise for what they offered and they have to either come up with the difference (which many don't have) or walk away and start over again.
While I have promoted the $8,000 credit as a bonus to buying a home this year, I stop short of scaring my clients into buying something that doesn't serve their needs just because of the $8,000 tax credit. I have even been criticized by some of my clients Realtors for my comments to our mutual client when they're complaining to me about the absolute dump they've just put an offer on and how horrible it is and they don't know why they did it.
Once upon a time, I wondered what would make a person do something like that. Personally, I would never buy a house that I didn't like. When I started posing the question to my clients, the answer most often was because of FEAR! Fear of losing the tax credit. Fear of not finding something before their lease was up. Fear of disappointing someone. FEAR! FEAR! FEAR!
Jessica posted a bunch of tweets about not being afraid of coming from a position of strength. BRAVO JESSICA! I second that motion. However, the power positions that Jessica outlines in her tweets to her market don't necessarily apply to my market here in LA & Ventura counties.
I just want to offer buyers in my market some tips that I think might be a better strategy for them and their situations then the one they're using now. The thing about these strategies is that they don't involve the $8,000 tax credit.
1. While the media may be screaming at us everyday that it's a "buyers market", here in LA & Ventura counties, the "buyers" they're most often referring to are all cash investors. If you're planning to finance your purchase, you will not have as much negotiating power as an all cash investor - regardless of how much more you offer.
Accept this fact and realize that you are already at a disadvantage and work with your Realtor and LO about ways that they can make you a stronger buyer/borrower that don't involve over paying for a property you don't want.
2. Stop overbidding! Stop bidding what the area comps will not support! While your offer may be rejected and you lose out on the property, you save time, money and anguish by not having to walk away a couple of weeks later.
Don't get mired in self-pity because you lost another one. Suck it up! Immediately move on to another property. You'll be that much stronger and smarter for it because you didn't waste your time, energy and money on an over-priced dump that you really didn't want anyway.
3. While many properties have been artificially listed below market, these are merely suggested list prices and the starting point for the bidding wars. You still need to have your Realtor run the comps for the area so that you can make a fair market offer for the property. With LA & Ventura counties being declining markets, by making a fair market offer, you're still going to get a good price for the home, better than you would have a few years ago.
4. While there may seem to be a lot of inventory out there, there really isn't. LA & Ventura counties are down to about 2-3 months worth of inventory. This is historically low inventory for this area. Furthermore, there will be quite a few properties that say "NO FHA" or "CASH ONLY". Try and see if your Realtor and/or lender can find out why.
Sometimes, it may because the property won't qualify for a standard 203b but it may be a good candidate for a 203k. It may be because the property was flipped less than 90 days ago. There are some exceptions to that rule that the listing agent may not be aware of. Maybe day 91 is fast approaching and it's just a matter of stalling for a couple of days before dating the contract.
Just because the MLS is disqualifying you doesn't mean you may not still write an offer and possibly get it accepted. Some properties may just need a little more footwork to be done before you can submit an offer.
5. While it's true that builders are offering quite a few buying incentives (especially in the Santa Clarita & Antelope valleys), be very careful of what you may be getting yourself into by using the builders sales office and in-house lender to represent you. If possible, really try and have your own Realtor and lender represent you and your best interests. You will probably be very grateful in the end for their services.
6. Many REO seller banks will absolutely dictate the terms and conditions of the purchase transaction. If you don't sign all of their addendums as well as waive most of your contingencies, they may not accept your offer. If this is not in your best interest - walk away! Actually, RUN AWAY! Run as fast as you can and move on to another property. If they come back to you later, don't cave in - stand up for yourself and your best interests.
7. Real estate is a long term investment and in this market, it may be several years before you may be able to afford to move up. Be sure the place you're buying is somewhere you can see yourself living for at least 3-5 years.
The only people making money flipping in this market are cash investors and even some of them are having a hard time. If you can't stand the place now (even if you clean and fix it up) and if you can't see yourself being there for a few years then move on to another property.
Remember, REAL ESTATE IS VERY LOCAL! What works in your market may not work in my market and vice versa. Unless you're here in SoCA, you may not have any idea of what our buyers are going through here.
I would love to hear from some SoCA Realtors about how they are getting their FHA buyers offers accepted. This would be useful info for me and my buyers and the Realtors here in LA & Ventura counties.
The ones that I've been closing this year seem to be taking a long time to even get into escrow. Most of my closed escrows this year were the result of my clients looking for many, many months and losing dozens of offers before getting one accepted.
Just this past week, I have spoken with two of my clients who are thinking of putting their home search on hold until the first of the year. A couple of weeks ago, I had another client who came to the same decision.
While I was saddened to hear that these clients (that I have been working with for most of the year) have just become so disgusted with the whole process, I certainly understood their need for a break from the insanity. They assured me that we would keep in touch and that they would let me know when they were ready to start again.
I've seen this before - a lot actually. These people are just so drained with working their full time jobs, taking care of their families or themselves and spending every spare moment looking at properties (evenings and weekends). At this point, they don't give a %@#$ about the $8,000 tax credit, which probably should have been their attitude all along.
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