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The last couple of months have been hard on buyers who are trying to find the home of their dreams before the tax credit expires and becomes the stuff of dreams. As I type this, a tax credit extension/expansion appears imminent, but leading up to this week, the under $400,000 market in Northern VA has been crazy. Buyers are having to put offers on four or five properties, or more, before they finally get a ratified contract.
I would be lying if I said that I haven’t been grateful for the burst in activity and the effect that the positive statistics have had on consumer confidence. What concerns me is the feeding frenzy that circumstances have created–low inventory, low interest rates, and a tidal wave of buyers that did not exist four months ago–that mimics the boom market that left the balloon debris we are still trying to sift out of.
Four months ago, you couldn’t even get buyers to poke their heads into an open house. Now, buyers find themselves in multiple-contract situations that are causing offer prices to go above list prices and contingencies designed to protect the buyers’ best interests to be waived.
Recently, my buyer put a contract on a “normal” resale—meaning it was not a foreclosure or a short sale. The last property to sell in that neighborhood netted the seller $261,000 two months ago. The property my buyer put a contract on was listed for $279,900. Four months ago, listing a property for more than the last comparable property sold for would have been the kiss of death, but in this market, that is clearly not the case as my buyer’s was one of at least ten contracts. The winning contract netted the seller at least $10,000 over list price, and the appraisal clause was waived. I will be watching to see what the property finally sells for because I’m pretty certain it will not appraise for even what the property was listed for; this means the new buyer will have to pay cash for the difference between the appraised price and the price they offered.
When the listing agent shared this information with me, I hung up the phone, shaking my head, and saying to myself, “That buyer just handed his $8,000 tax credit to the seller and said, ‘Oh, and lemme throw in a free trip to Disney World as well!’”
There are many in this country that blame Realtors® for the recent real estate bubble–claiming that in an effort to pad our wallets, we encouraged the crazy-fast escalation of sales prices. That debate is for another post, but it seems to me that there is a lot more than greed and dollar signs at work.
Most buyers are not just buying a house; they are buying a home; they are buying a dream; they are buying the back-drop for the photo album of family holiday pictures that will be shared with grandchildren. As they reach for this star, they are also trying to make sure that they are being wise, don’t lose their window of opportunity, don’t have regrets, and don’t lose out to someone else…again. As we try to wrap our arms around what it will take for the real estate industry, the banking industry, and the economy in general to recover, sometimes the biggest factor is not inside of our wallets but inside of our selves.
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