Most of us would agree that the current real estate market is a "Buyer's Market." Prices and interest rates are still low and there are more bank owned and short sale properties still coming on the market. Understanding current market conditions, the loan process and the Do's and Don'ts of negotiating are key in helping buyers purchase a home at a good price and terms. Buyers need to know what price they feel comfortable paying and understanding what their monthly mortgage will be. Working closely with a lender is necessary and buyers should speak to more than one lender before making a decision.
It is a buyer's market, but that doesn't necessarily mean that the buyer has complete control of the deal. The majority of properties on the market are either REO'S or short sales. REO or "bank owned" properties are homes that have already been foreclosed on. Short Sales are usually properties that the seller has become delinquent with the mortgage payments and are at risk of being foreclosed on. In a "normal" market, buyers negotiate the terms of an offer with the seller, through their realtor. Buyers try to learn what the seller's motivation is when deciding what price and what terms they put in their offer. Terms of an offer to buy include purchase price, deposit amount, repairs, seller credit for closing costs, home warranty, contingency periods and close of escrow.
With our current market however, the negotiating process is much different. Bank owned properties use Asset Managers to act on their behalf. Most banks still have a back log of properties that still need to be sold. Banks will list the home on the MLS with a real estate company. These properties are sometimes priced aggressively in order to get the property sold quickly, and generally they receive multiple offers. Most banks want to sell these homes "as is." When writing an offer on bank owned properties, keep it simple. Asking for too much in the offer may put the buyer at risk for getting their offer rejected. The asset manager wants to know what the net proceeds are for the bank. Banks will usually not do any inspections on the property and it is up to the buyer to pay for any pest, roof or home inspections. Banks may do repairs if the repairs are considered to be a health and safety issue. FHA loans will sometimes require certain repairs to be made prior to close of escrow. Banks may limit the amount credited for the buyers closing costs. Buyers should know what type of loan they are getting before submitting an offer. Some banks require the buyer to be pre-qualified with a preferred lender but cannot require the buyer use that lender. When an offer is accepted, the buyer will usually have a shorter contingency period to get their inspections, appraisal and loan approved.
Short sale properties are different than REO's. The seller's lender will first determine that the seller has a hardship and can no longer afford their mortgage. The property is listed and when an offer is received, the listing agent will submit it to the banks short sale loss mitigation negotiator. The short sale process does take time. These negotiators can literally have a hundred files that they are working on. It can take one to six months or more to get an
approval on a short sale. Buyers that put offers in on short sales need to be patient. Repairs and closing cost credits are little easier to get approved on short sales. Short sales are getting approved faster than they were a couple of years ago, as banks have realized that it is better for them to accept a short sale than to foreclose on a property and at less of a loss to them.
Buyers that are shopping for a home should know what it is they want. The price of the home is obviously important, as well as the condition of the home. Don't forget, Location, Location, Location! Understanding the home buying process is a lot to absorb and in this particular market it is even more important for buyers to do their homework prior to writing an offer. When writing an offer, know where the value of the property is, know what price and
terms you want and be prepared for a possible counter offer.
Buying a home can be stressful and confusing. Buyers need to know what they want, what you can afford and understand that there will be some negotiating.