There’s no question – the real estate market has bottomed and prices are beginning to move up. In many markets right now the inventory is low, putting upward pressure on prices. And there are more buyers coming into the market, both investors and homebuyers. The entire feel of this market is different than in the past few years.
Many sellers are still “underwater” (property value less than mortgage debt), some significantly, but at least there are buyers now, and for those who are selling via a short sale, the process is slowly getting a little easier and more streamlined.
Congress extended through the end of 2013, the provision in the Mortgage Forgiveness Debt Relief Act of 2007 relieving homeowners of the need to pay income taxes on mortgage debt forgiven in a short sale. So if you are a homeowner, if you owe more on your home than its worth, and if you need to sell, you still have time to take advantage of a short sale – but don’t wait; list as soon as possible, as it will take some time. If you are considering a short sale, my advice is to consult at least a couple of attorneys experienced with short sales – initial consultations are generally no charge. We can provide you a list of experienced short sale attorneys.
Your expectations may need to change, if you’ve been looking for a while. Over the last few years, when it was clearly a “buyer’s market”, buyers could hold out for very low prices and have plenty of time to wait for that “perfect” house to come on the market. Not any longer. Now you may have limited choices. If you do see the perfect property, don’t wait and don’t underbid.
If you are planning to buy in 2013 here are some things to keep in mind:
You must be pre-qualified or pre-approved for a mortgage (assuming you are not a cash buyer) before looking at any property.
If you are an owner-occupier, you may find yourself competing for properties with investors, most of whom are cash buyers. If you are trying to purchase a very low priced property that is attractive to investors, you will most likely need to offer more than a cash buyer for your offer to be considered by the seller.
List price may not mean a whole lot. We are seeing some properties priced way below market and some priced way over market, some on purpose and some not. It is really important to know the market and what the “comps” are before making an offer.
The type of financing you use to purchase a property may be dictated by the type of property. And you may need a different lender for a different type of financing. For example, you may be qualified for a conventional loan to purchase a condo, but want to buy a condo that is a Fannie Mae foreclosure approved for HomePath financing. Many of these condos will not qualify for other types of financing, so you may need to find a lender who participates in the HomePath program. The key is to remain flexible. The bank that provides your initial pre-qualification or pre-approval may not be the lender that ends up financing your purchase.
If you are planning to purchase a condo on the south side of Chicago with FHA financing, you will have limited options; very few condos are approved for FHA.
Understand the short sale process and the pros and cons. We spend a lot of time on this subject in the Home Buyer Workshop. There are some great opportunities now in short sales, but lots of uncertainty as well.
While prices are inching up, and you will pay more this year than you would have last year, we are coming up from a very low base and real estate is still a very good deal, still cheaper than renting, in most cases. And don’t panic about prices increasing – it’s all relative. For example, a condo that sold in 2006 for $250,000 may have sold last year for $120,000, a 52% decrease. Maybe that same condo will sell this year for $140,000 – that’s a 17% increase from last year, but still 44% less than in 2006, and still significantly cheaper than renting the same unit - still a very, very good deal.
Inventory of properties available for sale has gone down. There are still foreclosures and short sales coming to the market, but there are also more buyers in the market. You certainly want to take your time and find the right property, but don’t wait too long to make an offer, or it may be gone. And make sure you make a good offer based on recent “comps”, even if that means offering over asking price.
There has been a significant reduction in the number of brokers, particularly full-time brokers. Unless you have a committed, on-going relationship with one broker, you may find it difficult to see a property on very short notice.
If you have any questions about particular properties, the buying or selling process, or the market in general, please don’t hesitate to contact me or Tennille.
We specialize in working with buyers and sellers on the south side of Chicago. Please give us a call!
Pam Dempsey, ABR SFR
Bronzeville Properties LLC