Market Conditions in 49424>Question Details

L, Other/Just Looking in 49424

How can home buyers successfully compete in this current market?

Asked by L, 49424 Sun Apr 28, 2013

The couple that I know looking for a house expressed to me frustration yesterday. They have made three offers, with two of them asking price, and have lost out on all three. Two were HUD homes, one was a Fannie Mae. One of the winning bids (HUD home) published the winning bid and it was less than they offered. They have already sold their former home and are staying with a friend temporarily. They are offering cash and (depending on the offer) have very little financing involved. The only contingencies they've shared with me is pending a home inspection (and I would also assume financing, thought they are pre-approved). They want a home in close to move in condition (per whatever the bank defines that as) but do not mind doing any work needed.

I know that people here have been mentioning having to offer OVER list. OK, but why set a price if you actually want more? Isn't there a risk of another mortgage bubble situation if you are overpaying for a house?

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Answers

8
The reality is only a small percentage of homes sell above list price. HUD homes are typically properties that are in the lower price range, and attract 1st time home buyers and investors alike. With a broad interest group, and a price range that is affordable for many, there is lots of competition for these homes. Even though the property values are rising, we are still a LONG ways from the peak prices in the mid 2000's. At this point there does not appear to be a threat of any type of bubble. In fact, in many cases today it is cheaper to buy than rent. During the housing boom, the cost to own far outweighed the price to rent, ultimately causing in imbalance that needed to be corrected.
1 vote Thank Flag Link Fri May 3, 2013
It looks like you have gotten a lot of good information here and the truth of the matter is when we as Realtors try to inform the Buyers how the market really is they look at us like we are crazy. Until they get their feet wet and submit a few offers it is only at that point that they realize they better submit their best offer on a property which will probably be more then asking. Then we see questions like yours.
If a buyer is paying cash it is one thing, no appraisal. It they are financing, you are correct the appriasal may come in lower then the accepted offer. At that point the buyer and the seller can continue their negotiating and maybe meet in the middle but that still means the Buyer will have to bring money too the table or they can walk away. But I would think it they really like the house they will find the extra money.

Good luck to your friends :)
1 vote Thank Flag Link Mon Apr 29, 2013
Trying to find a house can be a stressful time. Even more stressful if you do not have a buyer's agent working for you. The market value of real estate has started showing signs of improvement and there are more instances of multiple bids that end with purchase prices being higher than the listed price. The seller will sell for the listed price but if they receive an offer over the listed price they are certainly willing to accept the higher amount as would any seller. However, if the appraisal does not support the higher price, than the bank will not finance an amount higher than the value. In that case the buyer would have to come up with the difference, try to negotiate the price down to the appraised value or walk away from the deal. Each deal has its own uniqueness and no one answer will work for all. I have a free brochure I can mail to you that may be helpful in your search - "Home Buyers Toolkit". There are no additional fees for you to have your own agent work for you at our firm. In fact, it will probably save you a lot of time and stress. Let me know if I can be helpful to you.
Roger Roe
Broker/Owner
616-299-2771 cell
616-796-9784 office
1 vote Thank Flag Link Mon Apr 29, 2013
I sure can understand your frustration! It is true that, in many case, offers are going over full price. In some instances many thousands over full price. Do your friends have a Buyer's Agent representing them in the purchase? It is critical to have a Buyer's Agent to explain all of these market factors to you. Each house for sale is unique. Some are priced right at market value, some are priced below (which are the ones that usually are selling over full price) and some are priced too high. Each property would require a different strategy. I could go on and on about this, but the key is to have a Realtor represent you. At my firm, there is no charge for this. Another note is that most of the appraisals on Hud homes are done using sold properties from up to 6 months ago. The market has greatly improved in our area in the last 3 months, and those old appraisal comps. wont reflect that. Again, there is much more, please feel free to contact me directly for more info. susancompagner@gmail.com and 616-836-2603 call/text. I am an Assoc. Broker and have been in business over 20 years. Thank you for the great question.
1 vote Thank Flag Link Sun Apr 28, 2013
This is the way things are currently going in the market. It's becoming a sellers market with home prices slowing increasing. HUD homes are normally listed at appraised value. So over bidding on a HUD home if you are financing means you'll have to pay the difference between an overbid and the asking price. There are currently more buyers out there then desired homes. If they have cash they would be better off looking for home under the amount of cash they have so that they have room to bid. They also need to be looking at the homes during the owner occupant period and not wait until it opens to investors. Financing and inspection contingencies are typical and in most cases are acceptable to the seller. I've noticed in our market most decent homes are selling for more than the list price. Remember a lender isn't going to mortgage an overpriced home unless you're putting a hefty sum down. They are only going to lend to appraised value so a mortgage bubble isn't a risk.

Good Luck,

Karen Paytas, GRI, CMS
Realtor
Real Living Kee Realty
586-709-8465
kpaytas@mirealsource.com
1 vote Thank Flag Link Sun Apr 28, 2013
Thank you. They have, as far as I know, bid on the HUD homes in the owner-occupant period, and I believe the Fannie property as well. They looked at a home last week that was in some sort of trust and there were MANY investors there. It's just frustrating to watch them go through this.
Flag Sun Apr 28, 2013
Your main error is think that anyone is "setting a price"!
The LISTING price, whether it is a HUD home or not, is a number to get things started:
It may be a HIGH number, to convey the Seller's WORTH of the home. Or, it may be a very low price, to foment multiple offers. It is never set in stone.
Many Buyers have not been in this MARKET before; and do not understand that this one of the "normal" markets we see over the long term.
It is not an aberration; this is the usual way to bid and buy a house. If you cannot handle it, if you want things to unfold before you like a red carpet; you should have been looking a year ago.
1 vote Thank Flag Link Sun Apr 28, 2013
Yes they can.
As all the experts before me have revealed, the reality of todays market requires a buyer to wake up and smell the coffee. What many buyers don't realize is there currently exist 4 purchasing levels for homes. If a buyer is dependant on Trulia or Zillow, or for that matter even wasting time on these entertianment sites, they are yet to detect the aroma of the roasted Arabica been.
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In the past week, two homes were systemicly sold, one in (-1) days on market, the other sold the very first day. For the home seller it was EZ. Every inquirer was advised to know what 'Fair Market Value' was. An educated buyer is the very best buyer.These buyers do their research (with the professional they hired) to get the facts and won't be caught on real estate aggregate websites. Their time is too valuable. In the mentioned cases, the buyer understood the issue was "HOW FAR ABOVE LIST" they were willing to go. With the assist of a little caffine, the buyer(s) easily recongnized the VALUE and reponded accordingly. Those who needed to think about it had their decision made for them.
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A buyer would be well advised to understand, when a home is ready for sale. the first folks notiifed is those within the listing agents data base.
The second group will be those agents in the listing agents office.
The third will be all the agents who have done business (successfully and without drama) with that agent.
The fourth will be the activie agents in the area.
Fifth the home is placed on the MLS
Then eventually, the data is changed and appears on real estate aggregate websites.
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If you want to succeed in purchasing a home, you need to get the 'real' information, respond according to what 'market value' dictates, and if you find yourself asking 'WHY?" you need to understand the plan you have in play needs to be modified. The suggestion that 'Fair Market Value" as determined by willing seller and willing and able buyer (not the bank) equates to overpaying may suggest a bit of a disconnect with the current market.
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That is the role your multi-dimensional real estate professional fulfills.
Very often, a commitment to the agent representing the buyer, can get a serious buyer in the loop for level one to four. These resources will not be spent on tire kickers and those 'looking for a deal' or under the delusion HUD homes in 'move-in' condition are at such a great value to merit the frustration.
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There are many ways to make sure your offer prevails. However, these suggestions are of great value and should not be deminished by offering them freely here.
It is however, easy to recognize, that real estate professionals have many resources they can bring to bear in acquiring a 'move in Ready' home. For a buyer to maintain a pedantic fixation of bank owned property suggests an unwillingness to adapt to what the current real estate market requires.
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Consult with your real estate professional. Thats what they are being paid for. The buyer and seller, however, MUST folllow the guidance provided by those they have hired. That is how you get the results you want, not by second guessing those who you hire to guide you.

Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
0 votes Thank Flag Link Mon May 20, 2013
Based on your question there are a couple of items to consider,

The first is with bidding on a HUD home it is the net outcome which is the most important.

If there are 2 bids one for $49,000 and one for $50,000 but the $50,000 asked for 3% in closing costs then the $49,000 bid would win.

The second is the price listed is the HUD appraised price.

HUD homes are appraised against similar foreclosed homes that have recently sold in the general area, including other HUD homes. The condition of the home is taken into account with the cost of any needed repairs in mind and with the understanding that they're being sold "as-is." HUD does not want to hold onto inventory, so list prices are set at levels to secure buyers.

Given this criteria when I work with Buyers buying a HUD home we also do comps on all homes in the area. The HUD appraisal is important but when financing appraisal is completed they will use all the relevant comps and not just the foreclosures which can, but may not raise the price. The type of financing can be relevant also FHA vs RD vs Conventional.

The third is the earlier you bid the better. If 2 identical bids come in but one comes in on day 1 and the other at 5pm on the final day of the listing, the first bid wins. It is a true first come, first served. I have had clients in my office at 6am on opening day. Thank goodness I live on a farm!!! Keep in mind not all initial winning bids go through. I advise my clients they can keep their options open by becoming back-up bids.

The fourth is my company has a couple of agents who specialize in HUD's; listing several hundred in the last few years. When I started with HUD offers I sought their advice. They felt that within the first 90 days bids within 5-7% of the list price (including concessions) were the most successful. After 90 days there is more room for movement.

Overbidding the appraised price on a HUD home does not necessarily denote overpaying for the property. My advice make sure their agent is running the comps for them and they are getting their bids on in as soon as possible.
0 votes Thank Flag Link Mon May 20, 2013
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