My main market area (Livingston County Michigan) is one of the ‘lucky’ areas that’s experiencing nominal value increases over all. Of course, some individual homes, neighborhoods, and market areas are still seeing decreases in both the average and median prices. Market stats can be a funny thing. Remember what Mark Twain said about statistics, “There are lies, damn lies and statistics.”
So what’s a buyer to do? Here’s a couple of thoughts for you.
My first recommendation is to talk to your Realtor® about the value of a house that has your interest. The inventory is down (no subjectivity here, it’s a fact!) and the ones that you like are probably going to appeal to other buyers. I am amazed at the number of multiple offers I’m getting as a listing agent this year – and every one of them sold for more than list price. And they’re appraising, too!
Your agent can tell you if a home has a chance at appraising higher than list price. If you’re looking at a bank-owned that has been renovated and is truly in ‘move in’ condition, it’s not unusual for a term to be added to the inevitable multiple offer situations. That is that YOU are responsible for any shortfall between the accepted offer price and the appraised value. So if you tried bidding $160,000 on a house listed at $130,000 and it appraised at $150,000, guess what? You have to dig for the extra $10,000 ($160K accepted offer price - $150K appraised value = $10K shortfall). If you can’t cover it, you forfeit your EMD.
That’s just so nobody overbids on purpose with the hope of locking in the offer to later whittle down the purchase price. Yes, there’s isn’t much that the banks haven’t seen in the last few years.
My second recommendation is to see a lot of houses. At least a dozen. Of what you really want. If you looked at a few foreclosures and said, “ugh! Too much work”, or “not for me”, then you need to concentrate on the move-in condition homes. It won’t take long for you to instinctively know when a property is priced right and when it is overpriced. If you’re not familiar with the area, really grill the agent on your concerns and what is important to you. I’ve always felt that an educated buyer is the best buyer and I welcome those kinds of questions.
Last, don’t wait. Be ready to pull the trigger. Some banks are building in a waiting period for offers on foreclosures. It can range from a week to longer. They want to make sure the property gets some market visibility before taking an offer. The days of a low ball offer first day on the market are pretty much gone.
Make your offer reasonable in price and be prepared for what you will do in the case of multiple offers. Have an inspector selected so you can schedule that event quickly. It’s taking 30-45 days to close so do everything that you can to keep the process rolling along.
Take media reports with a grain of salt. All of the "home prices still dumping" reports do not apply to every state, city or neighborhood. Value is an ever changing thing and you have to be able to recognize those changes. Working with a market-savvy Realtor® and trusting your instincts will give you the edge.
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