WatchEverything fell apart in 2008 and continued in 2009. Bad loans caused thousands to default on their mortgages, thus deflating and temporarily freezing the market. Home prices fell. Foreclosures rose. Those were dark days, but lately it seems a light has broken through the clouds. What light do I speak of? Well, something’s been amiss lately. We’re supposed to be in a market lull, but recent statistics have proved that houses are selling again and that prices are going up!
Because of government programs like the Homebuyer Tax Credit, which allowed a $8,000 tax credit to first time home buyers and somewhere near $6,000 for repeat buyers, the market is slowly come out of its dirge. This credit was recently extended until April 2010, giving prospective homebuyers even longer to decide to buy. Other factors are boosting the market such as the President’s 2% mortgage loan modification which is helping “underwater” home owners pay their mortgage back to their banks.
While the real estate market may seem to be rebounding, many experts have cited that despite signs of life, the housing market is still in a downturn. “Booms” are commonplace in the midst of a market collapse. According to Mark Zandi, chief economist at Moody’s Economy, the crash is not over, and alarming statistics from the Standard & Poor Price Index show a market decline to about 38% (our previous low was 32%.) So it seems that the current upturn may soon slip back into a decline.
Caution is the key word here. You don’t want to make an investment that won’t pay off in a few months because the “boom” went out. But for For Sale by Owner sellers, this time seems tantalizing. After all, home prices are at their highest in over a year and the market is showing signs of life again—at least at the moment. So far, there has been no evidence that the “boom” is fading, and because of the extension of the Homebuyer’s Tax Credit into April 2010, there’s no reason to think that home prices should drop off again or activity should dwindle at least until that time. If the fruit is ripe, I say, pick it.
Since FSBOs have sidestepped the realtor and avoid commission fees by selling their home themselves, they stand to gain a lot more even if the price of their home is not quite what it was in, say, 2006. They can count on that extra $30,000 or so going straight to their pocket, instead of into the hands of realtors. Of course, in order to pull off a For Sale by Owner home sale, these entrepreneurs have to be smart. Sometimes, though, the information you need is unattainable—particularly when trying to settle the legal matters of home selling with the market in such a delicate state. It’s smart to have legal help—an attorney or online services that offer the assistance of a broker without the commissions. These services are easy to find through online For Sale by Owner communities such as Yigdigs.com.
The dismayed market doesn’t seem to be boding well for real estate professionals. They’re losing income because market activity has come to a near standstill, but FSBO’s can take matters into their own hands. And now that the market seems to be moving again, those who were considering selling should do so now, while the getting is good.
What do you think?
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Fremont, CA
Sellers whether they use a realtor or not have the same challenge. It comes down to equity and pricing.
As far as the market moving. It appears that its at the low end for the most part partially driven by first time buyers and my guess is speculators.
I would love to see how many of the those existing sales turn in to rentals or are flipped. What would would you think if half of those existing home sales are investments?
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Bellingham, WA
inflection point says
Sales to investors produce no resulting move-up buyer. In industrial terms, investors serve as control-rods in a nuclear reactor, limiting follow-on sales.
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What would I think if half those home sales were investments?
Same kind of malinvestments as well, like the spouse of someone I knew who put her retirement nest egg into webvan, because the stock had fallen enough to make it a good investment.
An investment pays a return. At least in these parts, buying a rental doesn't pencil out against the rent and expenses. Not yet. But one possibility in the years to come insofar as residential real estate goes, is that "we ain't seen nuthin yet". One difference between the property crash here and the one in Japan, folks in the buyer demographic were NOT strapped to their eyeballs with credit card debt, carpayments, student loans.
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Austin, TX
I haven't seen any statistics yet on how many are investments. But the spike in home sales is not likely to be investors right at the moment. I agree that it is primarily first time home buyers.
I think the good news for FSBO home sellers is that generally speaking their equity position is much better than a home seller using a full commission real estate agent. It can make the difference in coming to the closing table and getting a check, or having to write one.
For those that need to sell right now, going FSBO in this market uptick can make a lot of sense.
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Alexandria, VA
I think still large potion of current home sales in relatively wealthy area is investments.
Houses in better school district are selling in no time. Getting loan is taking forever unless you can provide them 20% or more DP and two years of income statement. Lots of cash buyers, not much first home buyers. Home price is even slightly increasing.
Usually the reason of FSBO is that the owner knows he can save 6% by doing so. Buyers don't care FSBO, and love to slash the price. If his house is located in prime area, he will get what he want fast. otherwise, he either take slashed price or let his house sitting on the market for months.
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Saint George, UT
elliemae's website
I think it's always the time for a FSBO. As long as the seller prices the house reasonably, everyone benefits.