If you’ve lived any length of time, you’ve seen trends come and go – especially in the arena of homes. Remember “Country” when pink and blue pastels were as popular as Farrah Fawcett posters on teenage boy’s bedroom walls? Or during the dotcom era when McMansions popped up everywhere like mushrooms? I remember when Golden oak cabinets graced every kitchen and Corian countertops and seamed-in sinks ruled. Colors, textures, favored materials, sizes of homes … it’s all changed. And will change again. And again.

In reality, the only constant we have … is change.

Trends have always been shaped by external events. We like to think that we’re the captains of our own destiny, but, truth be known, we’re all swept along by whatever currents are moving around us. Used to be that currents were defined by local issues: now, more often than not, the trends impacting our lives are being shaped by global events.

As an example, it’s becoming obvious that we’ve mortgaged our souls and the time to pay the piper has arrived. Therefore, current buyer wants and perceived needs reflect the idea that money will not be as readily available in the future as it’s been in the past. Like a slowly tightening belt, salaries are trending lower, bonuses are becoming less frequent (if at all) and interest rates are threatening to rise in the near future. Taxes are likely to increase, fuel costs are soaring … even a casual observer can see where this is headed.

Consequently, active home-buyers are now looking for different things than buyers just a few short years ago. Although there are still a lot of buyers out there, their priorities have changed and prospective sellers need to pay attention now more than ever.

Here are the top 3 buyer trends we’re seeing:

Trend #1: Good Value

It’s fun to walk into a McMansion with their soaring ceilings, expansive rooms and lavish amenities. Who wouldn’t want to live there? Apparently, a growing list of people. Large spaces are hard to keep clean without an army of maids and, with rising energy costs, they’re becoming very expensive to heat and cool. And would someone explain to me why a young couple with no kids actually needs 4,200 square feet? While beautiful to look at and great at making a statement that “you’ve arrived,” in reality, unless you’re fortunate enough to have unlimited amounts of disposable income, they’re simply not practical.

With grandiose on its way out, economy of scale is moving in.

Glitz is being replaced with value. Buyers are now looking for homes that not only represent a good value when purchased, but also won’t be too expensive to operate in the future as well. We’re officially in the Goldilocks Era with buyers looking for homes, “not too big, not too small, not too expensive, not too cheap … just right.”

Implications for Buyers:

· If this description resonates with you, you are not alone. Which means there are many other buyers out there looking for the same homes you are.

· Don’t expect a bargain. Expect to pay market rate for a nice home that meets your criteria.
 

· If it’s REALLY nice, expect to compete with others in a multiple offer shootout. Difference between now and the heyday back in ’05? Instead of paying tens of thousands over asking, the margins will be much lower.

Implications for Sellers:

· Trying to sell a McMansion? Good luck getting even close to your initial investment unless you live in a location that trumps common sense.
 

· Selling a normal home? Make sure your home is priced correctly for the market. Buyers won’t even visit homes they sense are priced too high – if the price doesn’t make sense out the gate, they’ll click to the next online listing. In about 10 seconds flat.

Trend #2: Great Condition

When REOs (foreclosed homes) first appeared in significant quantities with their “AS-IS” requirements, their arrival spawned a new breed of buyers. These hardy individuals looked past the obliterated carpets, dingy walls, missing items and trashed interiors to see … potential. I’d frequently hear comments such as, “Look honey, we can make it our own!” Many of these buyers not only had cash in the bank to pay for their down payment, they could afford subsequent upgrades as well. The return of FHA loans fueled this movement as the low 3.5% down payment meant additional available cash could be diverted to improvements.

FHA loans are still going strong, but appetites for fixing up homes after the purchase are waning. As the first wave of buyers bought distressed homes and fixed them up, their friends watched the process and concluded, in droves, “That’s not for me.” Banks have also realized this and the overall condition of REOs hitting the market today is vastly superior to the offerings of just a few years ago. Some banks now routinely carpet, paint and install new appliances to ensure their repos are in move-in condition.

Currently, homes that sell the fastest are those that are move-in ready AND are also perceived as a good value.

With incomes down, many buyers are stretching to just get in the door: they don’t have the money or desire to fix things up once they’re in. And, since many are working harder and longer just to keep their jobs, time has become a premium and fewer owners actually have time available to “do-it-themselves.”

And here is the rub: the criteria of “move-in ready” has changed.

Granite counters and dual pane windows now top the list of “norms” expected by buyers. New flooring, paint, upgraded kitchens and bathrooms are all items buyers want to see when selecting their new digs. Properties featuring these items move to the top of the list and, if priced correctly, move on and off the market in a very short period of time. Think it’s a buyer’s market? Think again. Well prepared, correctly priced homes in our area can usually garner multiple offers within a week.

Flippers have begun to shine in this market because, of all available homes for sale, their products usually look the best. They are vacant, meaning they are very easy to show, and, if the flipper knows their stuff, have all the criteria ‘move-in ready’ buyers want to see. There are some problems with flips (click here for more details), but in a world of frumpy REOs and short sales that are impossible to view, flips are usually the brightest beacon on the block. Buyers are more than willing to pay more for homes that can be occupied the day escrow closes with “required improvements” limited to items such as changing out light bulbs.

Implications for Buyers:

· If you want a move-in ready home with the amenities you love, expect to pay the going rate.
 

· If it’s REALLY nice, expect to pay slightly over market price. (See Buyer Implications in the previous section)

· Make sure the sellers pulled all the appropriate permits for their upgrades. With many cities in dire financial straits and looking for income, some (eg. Oakland) have code enforcement personnel out scoring the streets. Fines can be heavy and may turn your dream purchase into a nightmare.

Implications for Sellers:

· Pay attention – the tide is turning and buyers want to buy homes that are “turnkey.”
 

· Hire a Realtor that understands this – as an example, we own a staging company that also provides project management through a licensed general contractor. A skillful, trained stager can suggest improvements and upgrades that will make your home sizzle, yet not cost you a bundle. If done right, an investment of a few thousand dollars can reap huge dividends. We discovered time and time again that sellers willing to properly prepare their homes will not only get a quick sale, they’ll get top dollar as well.
 

· RESIST THE URGE to price your home above the market. Because of Trend #1 above, it’s a surefire way to fix up your home and then get no takers. It’s like getting all dressed up with no place to go. A total waste of time.

Trend #3: Bargain Basement Deals

Seen as a “right of passage” for many buyers (and some cultures), a “totally screamin’ deal” provides the necessary ammunition for bragging to family and friends. And brag they do. In fact, some pontificate so much about the virtues of a bargain that others in their circle of influence will resist buying a home they like simply because it might not be as good a deal as the one their best friend’s cousin’s boss’s barber’s aunt’s fishing buddy found. Three years ago. In a different city.

Consequently, I’ve encountered MANY buyers who refuse to buy a home they love and can easily afford simply because they do not believe it is a good enough “deal.”

Forget that it is where they want it to be. Never mind that it has all the amenities they are looking for. Or that their kids can walk to the best school in town. They pour through local tax records and previous sale prices and if another comparable home has sold for less, regardless of the amenities, conditions, location, etc., they will not offer more for the home they love than the price per square foot of the previous deal. Market increasing? Doesn’t matter. Long line of buyers out the door during the Open House? Inconsequential. Already 6 offers on the table? They will still write their offer at their “deal” price … and lose out every time.

I call this misplaced optimism and it’s a classic case of buyers trying to out-think the market.

They’ve forgotten the purpose of buying a home: to provide shelter, maximize tax deductions, long-term appreciation potential and so on. Instead of buying a home, they are fixated on buying … a deal. And, while they may actually get lucky and find one no one else has discovered, they might also win the lottery. Not. Truth be known, there are MANY buyers out there like this and they are showing up in droves at any nice house and writing untold offers hoping to score.

For many of these buyers, no deal actually means … no house.

Implications for Buyers:

· Get real. Expect to pay market rate for a nice home that meets your criteria. If you are consumed with getting a deal, go to BIGLOTS!.
 

· As stated above, if it’s REALLY nice … expect multiple offers. If you want the house, you will need to go over asking price.
 

· Instead of viewing the price as “the deal”, view the long-term benefits as “the deal” – tax savings, quality of life, potential appreciation and so on.
 

· Resist the urge to waste everyone’s time.

Implications for Sellers:

· Don’t be insulted by the lowball offers that come floating in. Counter back to reality. You never know, they may have simply been testing you. If they disappear, don’t lose any sleep over it.

· If you’ve done your homework and followed the suggestions in Sections 1 and 2 above AND are priced properly, market value offers will come. If they don’t within a few weeks, adjust your price until they do.

As in every aspect of life, things change. In this case, global events are causing buyer tastes to migrate towards frugality. In reality, it’s a good move and sellers need to be paying attention. With the market transitioning yet again, if you want to sell your home to today’s buyers, you’ll need to take the time to position your property so it comes in line with …

What buyers are actually buying.