Buyers’ Market-In Some Areas It’s a Bit Different

Buyers Expect Deep Discounts Sellers Are At Their Limits

Home prices keep falling, and buyer expectations for bargain-basement purchases keep rising. The only player in the game who can’t see any room to keep these trends moving is the Seller.
Sellers are frustrated, and many are at their rock-bottom, while that price isn’t attractive to the Buyers who are comparing it to a large group of foreclosures in the area. Sellers can’t or won’t move any lower, especially when they have a home that is in good condition and move-in ready. Most of the foreclosures these homes must compete against aren’t in anywhere near that condition.
Buyers though are trying to steer clear of fixer-uppers. Many buyers must stay away from most foreclosures, as they need a mortgage, and lenders want the home in livable condition at closing. So, buyers are crowding around the few foreclosure listings that are in decent-to-good condition, and they’re getting outbid at every turn.
Money talks, and cash screams when banks are trying to unload huge foreclosure inventories. So, many buyers are simply unable to purchase when the bank would rather take less to get cash and avoid financing bottlenecks. Then there are the nicer foreclosure properties with pre-approved buyers who are competing and bidding aggressively.
While you might think that these bidding wars are happening only in areas not so hard-hit in the housing and mortgage crisis, examples that illustrate the problem most dramatically are in places like Florida and California. These are hard-hit areas, yet there are Sellers holding out and getting good prices simply because they have a home that’s ready to live in. Sellers in both states have found that they had an easy time getting rid of their homes for decent prices, but then they were outbid numerous times when trying to pick up a bargain in a move-in ready home, or one that doesn’t need a ton of work to make it livable.
The “trade-up” Buyer has pretty much disappeared. This buyer has been the mover of housing markets and prices in the past, trading up their equity to a larger home or one in a better neighborhood. They can’t do this now, as they can’t get that kind of equity out of their current home.
Sellers are pulling their homes off the market to wait for better days. If they don’t have to move, and they can pay their mortgage payments, they are simply getting out of the market until they see some drop in the foreclosure inventory, their selling competition. Of course, with fewer move-in ready homes on the market, and a great many foreclosures in need of a lot of work, the homes in the middle are becoming the sought-after properties.
What About Investors?
Actually, the stories about this situation all say that Buyers are being frustrated by investors with cash taking some of the best values. If you have cash, or can get cash to grab the homes with reasonable rehab requirements at a deep discount, you’re going to be able to flip for a nice profit or put a cash flow-profitable rental into a hot market with rising rents.
One strategy that can work for long term investors in this special situation is using short term funding to bid to banks with cash, and have refinancing lined up right behind it.