In the last two years, the housing market in the Charleston area has changed from being a “seller’s market” where sellers had the upper hand and buyers had to dance to their tune, to a “buyer’s market” where roles are reversed and buyers now have the advantage.
The housing market is affected both by the real numbers (supply and demand), and by the PERCEPTION of the market created by the media.
It is true that we have much higher inventory today that we had in mid-2006. But on the other hand, demand has not collapsed like it has in California, Nevada and Florida, we are still selling homes at a pace comparable to 2003, which was not a bad year!
So, why are we complaining about our housing market? I believe that the media has chosen to publish only sensational headlines (in this case bad news). Here’s an example: A colleague of mine was recently interviewed for a newspaper article about the housing market. But, because his outlook for the market was positive, he was not even mentioned in the article!
So we have a real disconnect in this market: On the one hand we have the sellers, with their inflated idea of what their home was worth in 2005 - when the media articles were all bullish and full of adrenaline and greed; and on the other hand we have the buyers, who are permanently reading negative “doom & gloom” articles and believe that they can buy any property for half the price!
In Charleston it is true that in some areas priced have dropped, but prices have kept constant in other areas. Some areas have more than 2 years’ inventory, while others only have three or four months. In my opinion, it is not wise to apply a “national average” situation to all submarkets without doing a proper analysis.
When a buyer tries to make a “lowball” offer to purchase a property, he/she runs the risk of offending the seller and breaking the negotiation (I am basing this analysis on the assumption that both the seller and the buyer want to make this happen!).
To increase the odds of ending in a successful transaction, I recommend to look at:
- Sellers’ Motivation: How motivated are the sellers? Are they in a financial crisis? Are they selling because of a catastrophic event (divorce, death, layoff)? Did they purchase another house and already closed on it? Or do they need to sell this one to close on the new one? Is this a short sale? Or a bank-owned (REO) property? (Note: Banks don't tend to get offended when they receive lowball offers!)
- History of the Listing: How long has it been on the market? Have they lowered their price? Has it been under contract before and failed? Have the Sellers changed their listing agent?
- Debt: How much does the seller owe the banks? (many sellers refinanced their debt on the home and spent their gains “in advance” of a sale, so they have no room to negotiate on price).
- Willingness: Are both parties showing patience and good will to work together to arrive to a mutually satisfactory solution? (in this market it is very common to have several counteroffers and extended negotiations before an agreement is reached)
Buyers: You can get great deals, but to increase your likelihood of success you must try to learn about the sellers’ circumstances and try to justify your offer with facts and figures to avoid offending the sellers and to increase the likelihood of getting a positive reaction to your offer (or at least a counter-offer). This implies you must do your homework first!
Sellers: In a static or declining market you must pay attention to ANY offer you get. Do not get offended by an aggressive lowball offer – make them a counter-offer! Keep negotiating and communicating with the buyer. Make a few initial concessions to show your good will. Remember: “A bird in the hand is worth more than two in the bush!”