“A primary method for gaining a mind full of peace is to practice emptying the mind.”
– Napoleon Hill: Was a lecturer and author of books on achieving success
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THE BETTER BARGAIN: FORECLOSURE OR SHORT SALE?
Short sales and foreclosures have flooded the housing market in recent years, and buyers are often drawn to the bargain prices but may be hesitant to jump into what usually is a difficult transaction and a long process.
Bankrate.com recently tackled the question of “Which to Buy: Short Sale or Foreclosure?” in an article that helps buyers weigh the pros and cons of a distressed property. Experts note that the question largely depends on buyers’ situations, how quickly they need a home, and their tolerance for fixer-uppers.
Foreclosure Pros and Cons
Buying a foreclosure is often faster than purchasing a short sale. Plus, buyers often can negotiate closing costs and price in foreclosure sales, Elaine Zimmermann, a real estate investor in Memphis, Tenn., told Bankrate.com.
However, abandoned homes in foreclosure can deteriorate very quickly so the buyer may need to weigh the condition of the home and whether they want a fixer upper. Scarred walls and carpets and appliances that were damaged by the former owner are not uncommon in a foreclosure, says David Richardson, an inspector in the Detroit area who’s certified by the American Society of Home Inspectors.
Short Sales Pros and Cons
A short-sale home is still owned by the occupant, so it tends to be in better condition than a foreclosure, experts say.
“The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it’s been occupied,” says Gwen Daubenmeyer, a certified distressed property expert with RE/MAX in Detroit. “The utilities have been maintained, usually the lawn is maintained, those kinds of things.”
But short sales often can take a longer time than a foreclosure to close. However, the federal Home Affordable Foreclosure Alternatives program, or HAFA, may be able to help speed up the short-sale process since it has created a timeline to hold mortgage lenders accountable, but still “it’s not perfect by any means,” Daubenmeyer says.
HOUSING PRICES THROUGH 2015
Everyone seems to have an opinion on where home prices are headed. Housing bulls are saying prices may start rebounding as early as later this year. Some housing bears are saying that prices may still drop another 10-15%. What actually is going to happen? No one knows for sure.
However, Macro Markets, a financial technology company, actually surveyed 108 economists, real estate experts, and investment and market strategists for their June 2011 Home Price Expectations Survey. They then averaged all 108 opinions. Here is what the report says about house prices over the next five years:
- 2011: prices will depreciate 3.52%
- 2012: prices will appreciate .46%
- 2013: prices will appreciate 2.18%
- 2014: prices will appreciate 2.92%
- 2015: prices will appreciate 3.47%
Accumulative appreciation (including this year’s projected depreciation) will stand at 5.71% in 2015.
The experts say home prices will begin to see appreciation next year and return to historic levels of annual appreciation by 2015.
FREDDIE MAC: BETTER DAYS AHEAD IN HOUSING
Freddie Mac’s chief economist is optimistic that the housing market and economy will improve in the second half of 2011.
Freddie Mac Chief Economist Frank Nothaft said mortgage rates will likely remain historical lows of between 4.5 percent and 5 percent for the remainder of the year. Also, he expects more buyers to stop waiting on the sidelines as recent price drops in home prices have improved affordability.
Nothaft said consumers’ uncertainty about the economy has caused them to delay home purchases and other “big-ticket items.”
“Some potential buyers who have the means to buy are awaiting clearer signs that home values have firmed,” Nothaft says.
But Nothaft says they should be getting their signs in the second half of the year, with projected job gains, and a growing, improved economy.
“Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, a number of positive signs in the economy indicate that growth will continue and is likely to accelerate in the second half of this year,” Nothaft said. “Look for a gradual improvement in housing activity in the coming year.”
5 QUICK TIPS FOR JULY 2011
1. Prepare diligently for EVERY appointment.
Most agents prepare well for a listing appointment. They go in with a complete consultation manual ready to show the seller why they should sell now and at the suggested price. They make sure they have all the tools necessary to have a successful meeting.
What about the buyer consultation appointment?Or the price-break appointment?Or the negotiation of offer appointment? There are four critical appointments in today’s market. We prepare for one of them. We ‘wing’ the other three. We must prepare as thoroughly for the last three as we do for the listing presentation. We must make the most of every opportunity presented from now until the end of the year.
2. Don’t forget the fundamentals; contact listings that expired in June.
History has shown us that the single day of the year that most listings expire is December 31st. The date that comes in second is June 30th. There will be more opportunity in the first week of July 2011 than perhaps in any other July in history. The number of expiring listings will be staggering. That means opportunity for someone. Hone your listing and pricing skills and approach every expired you can. The inventory of listings you accumulate in the first two weeks of July could catapult you to success for the rest of the year.
3. Gain knowledge and then get to work.
Two quotes from the late business guru, Peter Drucker:
“Knowledge has to be improved, challenged and increased constantly, or it vanishes.”
We have to become better at our craft every day. We must continuously improve our skills. We must become an expert at showing our customers what is taking place in the current housing market. They can then make the right choices for themselves and their families.
“Plans are only good intentions unless they immediately degenerate into hard work.”
It is not good enough to be a student of real estate. We must act on our knowledge. We must plan where we wish to be and then get busy making our way there. If I could have only one of all the attributes successful people are known to have, I would chose the ability to work hard. It is the most important and will get you closer to success than any other attribute.
4. Remember that a picture is worth a thousand words.
Whether we are taking a listing, consulting a buyer, doing a price adjustment or presenting an offer-to-purchase, we must be able to effectively communicate our customers’ options in the current real estate environment. The use of strong visuals dramatically enhances the chances that the consumer will truly understand the points we are making. Too many agents are satisfied complaining about the fact that their client just ‘doesn’t get it’ even after they ‘told’ them what is happening.
We must take the time to visually ‘tell a story’ on each point we are making. We must hone that story until it makes our point simple to understand. That is what differentiates talking at a person from truly educating them. We need to be great educators in this market.
5. Stop hoping the market gets better…Make sure YOU get better.
The same question comes up over and over – when do you think the market will get better? It’s a difficult time addressing the person asking the question. I don’t want to be rude but the real question we should be asking is – When are we going to get better?
The best market a true professional can hope for is a market that truly needs the skills of a well-trained expert in the field. Anyone can do the job in a market that doesn’t require competency, skill and insight. To the great real estate professional, a market’s strength has always been determined by how many people needed our help. In my 25 years in the business, I have never experienced a market that had more people who need our help in making the right decisions for themselves and their families.
Are we consistently doing the necessary research to keep abreast of what is happening in today’s rapidly evolving market? Are we taking classes to help us understand why certain things are taking place? Are we taking the time to sit with our clients and simply and effectively inform them of their options?
“Are we prepared to help?” becomes the question that needs to be answered; not “When will the market no longer require a true professional?”