The answer is yes and no. There are some interesting fluxuations happening in the Chicago suburban real estate market since last Fall. Many qualified buyers are having a hard time buying a home because there is a lot of competition. Multiple offers are rampant right now , changing the market to a Seller’s Market on certain properties and areas, and putting buyers in the position of competition.
Foreclosure properties are the most cause of the competition, but not exclusively. Great interest rates and good prices continue to bring more buyers into the market – many looking for the cream of the crop – price, location and condition. This is often forcing multiple offers and very quick market times. In many cases, we are seeing some of this due to deliberately underpriced listings by sellers and listing agents to achieve multiple offers quickly and create a bidding war between buyers. And it is working with the result closing properties at prices over the list price quickly and leaving many buyers frustrated and searching. If the property is in good condition, good location and great price – there is no coincidence that many buyers are interested.
Many of the most competitive price ranges in any market are the lower-end first-time buyer markets. If you are in that market, be ready for more competition as a buyer and movement more to the seller’s market. The more of you looking at the same homes, the more chance for a bidding war.
Also, since the robosigning moritorium, many banks put properties on the market with a teaspoon and bottlenecked the market with fewer available properties. This also helps pricing when fewer inventory is available – remember your supply and demand economics from econ101. We are seeing still some holdback, but the stream seems a little steadier in 2013.
Buyers need to be aware that listing prices are just that – prices that can go up or down. Depending on the seller and the competition – they are negotiable, but all are trying to achieve FAIR MARKET VALUE. But distressed properties are the catalyst for a lot of the activity and are setting the pace for pricing.
Sellers of non-distressed properties can benefit from the number of buyers on the market, but will be hurt if pricing is not competitive with these properties. In some markets with a lot of foreclosures, buyers with outdated properties or properties that need work will be compared with distressed properties. Pricing must be reflective in order to sell. However, some buyers want turnkey, move-in ready homes. Sellers with upgraded or turnkey properties at a fair market price can benefit from these buyers who see everything on the market that needs work and are willing to pay a higher price for an improved no-work property.
In these cases, buyers need to be aware of this when comparing distressed and non-distressed properties. You get what you pay for. If you are willing to do some work to a property, you can benefit from a lower price. But if you want a move-in ready home, be ready to pay for that and do not compare pricing with distressed properties that need work, unless you factor that into your thought-process on price.
So, how do buyer’s and sellers wade through the waves of inconsistencies to arrive at their designation of a purchase or sale?
Buyers – get a good Realtor and do your homework. Decide up front how much you are or are not willing to do to improve the home and make sure you and your Realtor discuss what pricing is Fair market for what you are looking for. If you are going to go into the more competitive price range, be ready to get into bidding wars and don’t be focused on the list price and getting a “deal” paying below list. Even full price is often not going to win the bid in this case. If you hold to a certain midset on paying for a home “x” under list or not participating in bidding wars, you will be losing a lot of opportunities. Prices are still low compared with historical values, so most homes are still deals. And sometimes you will need to adjust your thoughts on one thing for another – price vs. improvements. Remember, the properties that require more work are going to get deeper discounts and will be slightly more negotiable – again depending on market value.
Sellers need to do the same thing in the opposite camp. Don’t focus on what you paid and what you expect to get. Market value is the only determining factor. Get a good Realtor to help you compare your home with what is on the market. Listen to what they say and don’t be duped by those trying to gain the listing by telling you what you want to hear. Both will waste your time and put you further from your goal. Unfortunately, buyers will compare your homes to distressed properties. That is the market. You need to decide if your home is going to compete based on price or improvements. If you have more to offer, you can ask for more. But if you require similar work, be ready to compete head to head with the distressed properties. But, be careful about outlay for improvements. Again, consult a professional to ensure you will get your money worth from any improvements. Otherwise, the time and expense is not worth it.
In this ever-changing market place, buyers and sellers need to keep in mind that there is great benefit in buying and selling in this market. But there many perils and inconsistencies that can derail you. The media, word of mouth gossip and non-professional opinions are constant influences often send you down the wrong path. It is important to weigh that information with professional opinions and do your own homework to make informed and accurate decisions that will get you to the closing table. The market is the only thing to listen to.