Are Things Changing Out There?

Yes, the market is changing.  We are now experiencing a decline in inventory and the prices are slowly but surely rising.  The challenges this will create for homeowners of non-distressed properties who have decided they do not want to wait any longer to sell is ... can the property appraise?

We are already seeing evidence of this as we have in every market as prices increase on well maintained and improved homes when they are in the same neighborhood as distressed homes with lower price tags.  Buyers are reluctant to pay more for a home than "makes sense" based on comparable properties with similar square footage and location.  On the other hand, the non-distressed seller who has maintained and upgraded her home, is caught in a difficult situation.

Just as we, in the Real Estate industry, have had to educate sellers to the declining market, we are now educating buyers as they purchase homes that have the upgrades and amenities they desire.  There will not be as much flexibility in list to sale price in these homes.  Homes are selling at list and over list price.  Buyers will, in some cases, need to purchase a property that will not appraise but absolutely meets their needs.

Every buyer seeks out the best home in their price range based on the criteria they have established with their real estate professional. Although Realtors admit there is a wide range of how many homes the average buyer looks at before making a decision, they agree that once their list of wants, needs, and community is narrowed, there are only a few homes that match the list in the price range. If a buyer is willing and able to do the work on a "fixer-upper", a distressed property might be a good choice.  If the buyer can wait though the process of a short sale, they might be able to snag a good home for less than market value.  However, if they want a move-in ready home, the choice might be limited to a property that is priced at or over "market value"and they may have to adjust their thinking on what a fair price is for the home.

Change is good...challenging and always interesting!

Newest Trend...Becoming Landlords to Family Members

I am not sure this is the newest trend in real estate, perhaps it is an old trend resurfacing in a big way, but purchasing as an investor and renting back to a family member is BIG!  At least it has been a significant part of my business this year.  The interest rates are low; parents/grandparents might be sitting on a lot of equity in their present homes that is available at all time low rates as well.  Rents are high and rising along with the demand for rental property.  Knowing  family member who for many different reasons will be renting rather than purchasing a home in the present market makes for a perfect combination of landlord and tenant.

  In some cases, parents are paying for housing for a college student or new graduate.  Why not turn that into an investment rather than allowing someone else to collect the rent?  It may also be more cost effective to purchase.  Buying may cost less than renting and the investment write-off be a tax advantage.

  Of course, there will be things to negotiate not only with the seller but with the now
tenant/relative/child/sibling.  The mortgage rate for investors are a bit higher than that of the owner occupied and investor owned property might also have a higher real estate tax rate. The mortgage process for the investor is tedious and paperwork exasperating. In the end, there are many different ways to use resources, to invest and to be there for a family member, but providing one of the most necessary elements, housing is tangible and generous. I feel I am seeing a tread, each time I have witnessed it in my personal business it is a gesture of love and caring and it is deeply appreciated.  Something to think about....