Buying & Selling In A Changing Market

Could selling real estate take a page from a local appliance purveyor’s recent ad campaign offering television sets for no money down and no payments or interest for up to two years? Would you buy a house if the seller offered it with no money down and no payments or interest for 24 months?

Well, we’re not quite there, but in the different real estate market we’ve transitioned into, there is evidence that creative agents and sellers are suggesting novel approaches to generate showings and sales. To entice buyers, for example, some sellers are offering to pay extra lender points (dollars) so that the buyer’s loan rate is reduced. This approach was used often some years ago, when interest rates were twice what they are today, but even in this low-rate environment, it can be an attractive selling point to a potential buyer without the liquidity to buy down his loan rate. Creative real estate agents have also put together plans whereby sellers agree to pay buyers’ condominium association dues for the first year.

These are all variations of traditional ‘carpet and paint allowances.’ Most lender programs allow sellers to credit buyers for non-recurring closing costs. A handful of lender programs will even allow credits for recurring closing costs.

Other agents have gone well beyond serving lunch or holding drawings to entice buyer’s agents to preview and show their listings. Here’s a recent one: “$10 per showing, just leave your card.” Don’t you love how trustworthy Santa Barbarans are? Another agent requested a prequalification letter be presented upon every showing to qualify for a drawing worth $1,500 after the house sells. That is an unusual approach.

A few properties competing with similar type houses have employed these tactics attempting to set themselves apart from the pack. You might think, “But the buyer is the one making the decision, not the agent.” You are correct, but the buyer has to see the house first. Of course, in any market, you should remember that the basics are the best place to start. Consult with your realtor on making your home presentable, e.g., paint, carpet, remove the clutter, let in the light, spruce up the landscape and ask your teenage son to remove any illegal substances and odors. True story: I showed a house where the pungent smell of cannabis was so strong that immediately after their house tour, my buyers went in search of an ice cream parlor.

The most important consideration is pricing your property correctly. A local realtor generated nine offers on a property priced just below $900,000 that sold for approximately $30,000 over asking price. While pricing strategy is not complicated, it is tricky, so don’t try this at home alone. It does illustrate that there are ready, willing and able buyers out there in this market.

I started selling real estate in 1988 and experienced the slow-selling market of the ‘90s. People expected prices to rebound, but who could have predicted how high prices have soared? While some people fear a repeat of falling prices, Matt Carter from Inman News discusses the conclusion of a study by two economists at the Federal Reserve Bank of Chicago, Jonas D.M. Fisher and Saad Quayyum. Their take is that the “housing boom that followed the dot-com bust was not an artificial bubble created by low interest rates and speculation, but a product of increasing wealth, changing demographics and new mortgage products that helped renters become homeowners.” Although Fisher and Quayyum don't tackle the issue of housing prices directly, they conclude that the underlying demand for housing was, and remains, real. UCSB economist and economic forecast director Bill Watkins has taken a similar approach, particularly on the Santa Barbara market.

Want to buy a house today? Ask yourself this: Are you comfortable with payments? Do you plan on living in the house long term? Has your realtor showed you comparable closed sales that justify the price? Do you love the house? If you answered yes to all of these questions, jump in; interest rates will not stay this low forever.

And remember, if you bought a house anywhere but Santa Barbara…you didn’t pay enough.