“But I thought it was a buyers’ market …”
That’s what the last buyer said to me that had put in a half-dozen offers on homes and lost the contract on every single bid. It is, in fact, a buyers’ market but there also are a lot of buyers out there, especially in the $400,000-and-under market. This market accounts for about 78 percent of the closed sales during July.
Here’s an interesting bit of information: About 60 percent of those sold properties were paid for with cash compared to about 31 percent five years ago. The investors are back and it looks like they’re taking a second run at the real estate market.
While it’s important that there are investors in the market to help absorb inventory, it’s also a hindrance to the first-time home buyers that must rely on getting a mortgage to finance their home.
Banks that are selling foreclosures, just like any other home seller, have the right to choose the best price and most favorable terms to make sure they get their real estate sold. It shouldn’t surprise anyone that when a lender has more than one offer from which to choose that they just might choose the cash offer over one that has a financing contingency.
If you’re in the first-time home-buyer market and you’re experiencing difficulty getting an offer accepted, it might be helpful to know that of the foreclosures and short sales that are closing, about 65 percent of them are cash transactions. Right now, cash is king and many banks accept cash contracts over offers with financing even if it means taking a lower price.
What’s more, if you’re trying to finance with an FHA loan, most foreclosures do not meet the strict guidelines. If you’ve been actively looking for homes, you’ve probably seen some pretty sketchy places. Your agent may not know that when an FHA loan is involved normally the home requires a working kitchen with a stove and working kitchen sink, no termites, no broken windows, no structural defects such as foundation cracks, plus more.
The government is willing to back your mortgage but they won’t do it if the home is a hazard or considered uninhabitable. Since most of the homes that go into foreclosure are beat up and stripped out, they’re not remotely close to meeting a good portion of the FHA guidelines.
If you are dealing with foreclosures or the homes that fit your budget are mostly foreclosures, you might want to look into a different type of loan.
You should also keep in mind that bank-owned properties are often priced well or even drama-priced to get attention and bring in multiple offers. Full-price offers don’t cut it if the home is priced below market value and the keen buyers who have done their homework bid what the home is worth, not the price it’s listed at.
Many buyers do research to make sure they aren’t overpaying but forget that in a competitive market the property could be underpriced and will sell for more than list price.
Chris Griffith is a real estate agent at Keller Williams Elite Realty in Bonita Springs. If you have a question about local real estate or Bonita Springs e-mail her at email@example.com.