Are You Ready For A Seller's Market?

I've been talking for a while about lack of inventory. Now, for the first time since December of 2004, inventory is below 1000 for both Marco Island(homes,condos & lots) and Naples(homes & condos). This is significant since the laws of supply and demand will most certainly be kicking in some time in the near future. The laws of economics state that as supply decreases and demand increases, the cumulative effect is an increase in price. We've already seen marginal increases in price quarter over quarter. However, there are still some factors that are limiting the exponential growth that we saw in 2004-2005.
So, WHAT will take for the market flip to a seller's market and as a buyer, HOW can you take advantage of the market before it does?

Although some agents already believe that we have already switched, we believe that we still have a few roadblocks before entering into a full blown seller's market.

EMOTIONAL ECONOMY: Our economic conditions have improved but there remains a sense of caution about major purchases. Consumer Confidence has been on the rise since April. However, we will need to remain above 70 percent for another few months to indicate a stabilization of consumer confidence. The longer we stay higher the more demand will be generated.

CAUGHT IN THE SWITCH: While mortgage rates remain low, the appraisal process, required by most lenders, may be an area of concern. As the market turns and buyers are bidding prices higher than market value price to acquire their homes, the comparables are not supporting the price. The banks are still tight on lending criteria. Thus, may not approve the loan. In rides the cash buyer that doesn't have the requirement of an appraisal and can scoop up the property for around the same price. So, until enough cash buyers pay a premium for their properties or the banks loosen their grip, we won't see substantial price growth.

DISTRESS PROPERTIES: Although the distress property market has slowed down, there are still of high amount of delinquencies being reported on RealtyTrac.com and Foreclosure filings remains at 18% in Collier County. These properties will slow the price growth by keeping property near market value. Increase demand will push the distressed property prices through competition. Most REO properties that we offer on have at least 1 more bidder. As number of bidders go up, so does the prices.

STRATEGIES FOR SUCCESS IN THE CURRENT MARKET:

GET TO IT!: Timing is everything in the current market. There is no time to drag your feet on a target property. A days delay, could mean the difference between getting the property and having it go pending out from under you. If you like a property but aren't here to see it, we can write a contract contigent upon your visual inspection in a week or so. The shorter the period, the more solid the offer.

BE REALISTIC: We are in an emerging market. Inventory is low and demand will become significant as we approach high season. So, be realistic about what you can get for the money you want to spend. We have plenty of folks that have waited too long for that perfect property to come along and missed out on properties that would have  more than met their requirements with a little bit of work. Also, don't expect to get bigger, better & newer in Southwest Florida than you can in the north, that is unless you live in a high rent district like New York City. Areas of demand foster higher prices.

CASH IS KING: If you have cash to buy, it will help you ink a deal faster than a financing. Even if you are ultra wealth and want to take advantage of low interest rate, financed offers create too much uncertainty for the sellers. So, the easiest and most flexible  option is cash. If you have to finance, try doing more than the standard 20% down payment and provide as much supporting documentation(i.e., bank preapprovals, proof of funds, etc.) so that the seller has a warm and fuzzy about your ability to close the transaction. Also, when obtaining a bank approval, make sure you provide the mortgage broker with your needed financial documentation so that they can make an educated valuation of your eligibility. Preapprovals without this documentation are only worth the paper they are printed on.

BE COMPETITIVE: Don't be surprised if you are bidding on a property with other buyer's in play. Good properties warrant lots of interest. So, be competitive, figure market value and don't be afraid to set a premium on the property, particularly with REO properties.

Although we have some roadblocks, it's only a matter of time until the market switches to a seller's market. So, be prepared and don't delay. The hunter that strikes first usually gets the game. So, it's time to be the hunter.