Time to Buy
The time to buy and start getting prepared to buy is now.
The reason I say this is because we continue to be bombarded by texts, emails and phone calls from Real Estate Investors and Flippers of Property asking us if we have any "off-market" properties that we can offer.
Because we are licensed by the Department of Real Estate, we are listed as Realtors and therefore people assume that we are in the business of listing properties, but our business is qualifying people for mortgages.
I want to give you some guidelines on how you could get a great deal in this Real Estate Market which has become now a Buyer's Market.
Beware though this is not 2008! meaning, Sellers are NOT desperate and the market conditions are different than in 2008.
To be successful when purchasing property in this market, you need to understand the differences:
Inventory: was excessive, it rose to 12.5 months supply. This meant that at the volume of sales happening in 2008, it would have taken a little over a year to sell all the homes that were listed for sale.
Median Home Price: back then was $180,700 and most working people could afford a typical home. As the recession deepened, prices went lower.
Foreclosures: back then about 12.07% of mortgages were in different stages of the foreclosure process. That was extremely high.
Credit Risk: lending guidelines were lax and many people who were not qualified and could not really afford a mortgage, got one.
Negative Equity: because of lax credit standards and use of business-type mortgages, such as Adjustable Rate Mortgages that borrowers did not understand, a significant number of homeowners were trapped. They could not afford the payments, their home values kept decreasing and therefore could not sell them either.
Demographics: back in 2008 there were enough homes for family formation.
Inventory: is scarce, we have about 4.4 months' supply. This means that at the present sales volume, all homes listed for sale would be sold in 4.4 months.
Median Home Price: has now climbed to about $417,000, placing a regular home out of reach of many first time home buyers.
Foreclosures: they are starting to increase but at a much slower pace because lending guidelines changed in 2008 and the people who carry a mortgage today were qualified at the time when they obtained it.
Credit Risk: today is small because only borrowers that are qualified can get a mortgage.
Positive Equity: most homeowners have a lot of equity and they are not underwater. However they have no incentive to sell since many are locked at mortgage rates between 2% and 3% - inflation alone would pay for their mortgage.
Demographics: today the younger generation cannot afford to buy a home and this is interfering with family formation and decreasing demographics.
In Summary:
What we are seeing now is a slow deterioration in financial conditions rather than the sudden credit implosion that we saw in 2008. This means that the stress is unfolding over a long period of time.
Back in 2008 you could select a neighborhood and pretty much have your pick. You could send aggressive offers and get them accepted. You had plenty of foreclosures to choose from.
Today you have to be strategic, and you have to identify who NEEDS to sell.
The market has soften but it will not implode suddenly because:
Real Estate Values continue to be strong due to Scarcity
Existing Homeowners are NOT underwater
Existing Homeowners, in the main, CAN AFFORD to pay their existing mortgages.
But there is always a percentage of Sellers who HAVE TO SELL due to economic pressures, business reasons and family issues.
Realize also that location and condition of the property continue to be of paramount importance.
Still today, in this soft market, if the property is in a good location and in a decent condition, expect to overbid and compete with 4 or 5 offers.
The competitive advantage today lies in properties that:
Have Deferred Maintenance - something needs to be fixed
Are in good areas but not Prime
Where the Seller is motivated
Inherited properties where the relatives just want it sold
Older properties where the owners have died
Owners seeking to complete a 1031 Exchange
Local Markets that have crashed - for example Big Bear Lake in Southern California (and many others).
In the recent past, these type of properties were getting multiple offers and sold way above asking - not anymore, here it is where you will find deals.
You need to be patient. Unless you know the area and are experienced, my advice is that your partner with a local Realtor that you trust and who is experienced.
Do this:
Partner with a Realtor you can Trust (and who has experience)
Be Patient and spend the necessary time to find out what are the Seller's Motivations. (usually more than one)
Do send a letter telling the seller why you want to buy his property
Get personal, business IS personal in real life
Present a Win-Win solution, not a one-sided deal, remember: the Seller is motivated to sell, but not obligated to sell to YOU!
Crafting a Win-Win offer is not always immediate or obvious, it may take talking, meeting face to face and time!
Send Proof of Funds, Your Credit Scores and a full Lender Pre-Approval Letter that is really signed, not just a pre-printed form.
Be Patient, if necessary, go through SEVERAL Offers and Counter Offers, don't give up because you are in Counter Offer #2.
Be courteous, attentive, persistent, with a positive attitude, be a good listener and don't blow up! (Real Estate can be very Emotional)
This is worth repeating: If you find the ideal property, that is move-in ready, nothing much wrong with it and in a good area, be prepared to overbid a little, you will be facing 4 to 5 other offers.
A note about Technology:
Don't be blinded by "technology" or "AI". These are great tools to speed up back office processes and research but they are NOT a substitute to dealing with Human Beings. Sellers are NOT economic entities that simply obey the Laws of Supply v/s Demand. Sellers are in the Market because they are trying to solve a problem in their lives, if you know what that problem is and can offer a solution to it, your chances are pretty good. PRICE IS NOT THE ONLY CONSIDERATION!
Negotiation:
I have been involved in negotiations since the age of 15 when my Dad and Uncle used to take me to their business meetings. Negotiation is the Art of understanding your counter party and crafting a deal he/she would be silly to say "no" to while at the same time being advantageous to you. That's a real deal!
I hope this will help you find a property if you are in the market for one, or help you when you do.
Special Note to our Florida Customers:
Florida is experiencing a temporary slow down, specially in the Tampa Bay - Clearwater area, not so in Miami or Dade County which is booming. The State is growing and is receiving a positive influx of wealthy and well-to-do immigrants. Florida is pro-business and regulation tends to be light in comparison to other States. Take advantage of the temporarily depressed real estate pricing which is expected to resume its upwards trajectory (due to increasing demand) in August of 2028.
Yours sincerely,
