After a careful review of this months market statistics, it appears that the days of 10-15 offers on a property within a few days are over. Market times are climbing to close to 60 days on the market and there appears to be a little bit more negotiating room in most offers. There are more homes on the market to choose from and buyers are slightly less prevalent. Gone are the days when you could put a home in the computer at midnight and have 5 offers by the time you woke up (5 hours later). I say ITS GREAT NEWS!
You may ask why that is. The description of the market that I just described is what a normal market looks like. Not this aberration of markets we have endured since 2005. An average market time of 60 days (although mine remains closer to 15 days) is normal. 20 to 25,000 homes on the market in the entire Metro Phoenix areas is normal. Having to negotiate with only one buyer at a time and probably having to give just a little bit is normal.
For the past 6 years banks have dictated the way you buy a home and I don’t mean how you finance it. They have made their own rules about who can submit an offer on what property and when. They have made rules about how related someone can be to the seller to constitute an arms length transaction. They have even made rules about which agents get the governments (pseudo government) business and how much they get paid based on who they represent. Does any of that sound like it has anything to do with consumer protection or looking out for the rights of the people. I am not talking about this in terms of politics because it isn’t. It is bureaucracy!
FHA has a rule designed to protect the buyer from being taken advantage of by people in the business of flipping homes (buying them, fixing them and selling them for a profit). This is how this rule was recently interpreted. My seller, had recently transferred their interest from a family owned LLC into her personal name. It was well documented that no money changed hands, there was no tax advantage to the seller, and the individual seller would have received exactly the same amount of money from the sale of the home whether it had stayed in the LLC or not. This interpretation resulted in a second appraisal ($475 which could not be paid by the buyer) and a second home inspection ($400).
The property was never a flip, never sold for additional profit and this regulation clearly did not apply to this property. Because the lender is so afraid that they cannot sell their loans on the secondary market (this is how they replenish their funds), additional costs of almost $1,000 were introduced to this transaction for absolutely no reason.
These kinds of rules create delays and expenses in transactions that are unforeseen. A prime example is a rule that requires the lender to obtain tax returns for borrower directly from the IRS rather than the old way of having them furnished from the borrower themselves. Presumably this is to prevent fraud, but as many of these rules do, to stop the 1/10th of a percent of fraud, everybody potentially has their mortgage delayed by 5 or 6 days (when the government is working) waiting on tax returns that the borrower has in their possession.
Of course it is easy to complain about these incessant rules but they do add time, costs and extra work on all of the parties to a transaction. The old faithful time is of the essence clause certainly doesn’t apply in today’s market they way it once does. So here are my recommendations in todays market”
1. Don’t expect your home to sell in 3 hours for $20,000 more than the best comparable sale. I feel that a market time of approximately 14 days with only a single well negotiated offer probably maximize the sales price of a property. The old adage is “the first offer is usually the best offer.
2. As inventory and interest rates increase, the rise in home values will level off more than it already has (as predicted in the beginning of the summer). If you want to sell, it is about as good as it is going to get, right now.
3. Obtain your news about the housing market from a local real estate professional not from the media or the internet. Most trends are based on closed home sales which naturally lag actual trends by a couple of months.
4. Don’t expect your home to close on time (although almost all of ours do). A closing date is a target. There are an infinite number of ways that one of the 50 people who have to approve your closing can run into a snag.
5. Don’t make concrete plans based on your home closing on a specific date. Never sign a lease, buy a car or make another huge decision based on a home closing. In addition to delays, in 25 years I have had some unexpected disasters that happen at the last minute. It’s never fun to find out the buyer of your home is incarcerated.
6. A delay in closing is probably no fault of the buyer. It is virtually impossible for loan officers to foresee the needs of an underwriter on a particular file in this transitional period.