Foreclosures are coming! Lots of them!
PRICE YOUR HOME TO SELL!!
Info from lecture by Steve Harney
One of the biggest things that the recent National Mortgage Settlement Act gave that is important but not given as much attention to in the general public's eye is guidance to the banks as to how they can complete the foreclosures they have been holding on to. It gave them a road map. Due to the "robo-signing" scandal, banks have been holding on, waiting for direction on what to do with the foreclosures that weren't closed yet. This started in the 4th quarter of 2010. Just last month, the banks finally got the instruction through this act and people are talking:
"It does appear the number of completed foreclosures will increase following this settlement-especially in some judicial states with large backlogs-so there will probably be more REOs (lender Real Estate Owned) for sale." -Calculated Risk
CT is one of these judicial states that are not used to and will see the greatest increase in distressed properties coming to the market. CT had very tight restrictions on foreclosure properties, but those restrictions are gone now. There is a high number of people behind on their payments or already have the foreclosure process started. Those properties are about to come to market. The red states (over the national average of foreclosures in process) need to be prepared, and this spring there will be a downward pressure on prices. There will be an increased number of distressed properties on the market in CT.
NV, FL are not to worry about as much. These two states have already been hit with a tremendous amount of foreclosures. They know how to clear their inventory, and have seen the downward pressure on prices. They can handle it. Take a look at Florida, their prices are starting to turn already because they've cleared through their inventory. This brings up another point as to if anyone is thinking of selling in CT and moving to one of these states that are already seeing an upward in prices, it is best not to wait as prices are depreciating in CT and appreciating in other states.
So, for the Sellers out there with a house on the market...the properties for sale now that aren't selling, you need to understand that your houses need to be priced to sell now. There will be a lot of homes coming to the market, and your listings will be worth less in 6 months than it is now. It may even be worth less in 90 days. Yes, there is an increased demand, there are more people at open houses, you have heard in the media that the market is starting to pick up, but that is NOT going to impact prices in a positive way in this particular setting on the supply side...and the supply side is coming at discounted prices.
Basically, the price must be compelling to the buyers. There is a difference between a house priced competitively or a house that is listed at a compelling price. A house is priced competitively if a buyer walks out of the house and asks if there are any more listings to take a look at, a house is at a compelling price if the buyer walks out of the house and asks if there is anyone else coming to see that house today. If the buyer is not concerned that the next person walking in your listing is going to buy...they aren't going to buy.
So, why price to sell now? If you don't, you are losing a lot of money. Everyone projects prices are going to fall within the next 6 months. So let's assume a 5% fall (just picking a number here) in prices on a $400,000 house over the next 6 months. By the end of this time, the prices are going to try to turn, they aren't going to come back to today's prices but they will at least turn to the upward and then over the next couple years, turn to normal appreciation. But the big drop in price is going to occur early in the year. Ok, back to assuming a 5% fall over the next 6 months...a family loses $769.23 per week! $400,000 x 5% = $20,000. $20,000/26 weeks in the next 6 months= $769.23! There is a consequence to not adjusting the price range to sell right now.
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