Economists pour through reams of statistical data and draw conclusions based on history. Surely they must be the ones that can tell us what is going to happen with the real estate market going forward, right? No. Unfortunately, they can't. They can use their data to make sweeping generalizations about the national real estate market, but the information does not translate properly to local markets. However, this does not stop them from using the mass media to alarm the public with their findings.
So, it must be the REALTORS® who work in various LOCAL markets that can tell you what's going to happen in their area. After all, REALTORS® have all of the relevant local data. Surely they must know what is going to happen, right? Not exactly. Although we know how much homes are selling for, which listings are expiring and which homes are currently on the market, we can hypothesize about the near future, but we certainly cannot give any guarantees as to what the local real estate market will do in the coming months.
So if it's not the economists and it's not the REALTORS®, then who is this guru that can tell buyers when to buy and sellers when to sell? It's almost December, so it must be....Santa Claus! Of course not.
Give up? The answer is a homeowner living in a small town in New Jersey. I know that you must find this shocking because I sure did. If you're finding this hard to believe, please read the following example of this homeowner's wizardry.
This homeowner was trying to sell his home. It was on the market for the whole summer with a listing price of $439,000. The three month listing expired, and he put the home back on the market with another REALTOR® with a listing price of $419,000. About five months after the home first went on the market, a buyer that I'm working with made an offer of $380,000. The homeowner countered the offer at $390,000. The two sides were deadlocked, but if there was a way to get this deal done, I was going to make it happen.
The mortgage broker that I recommend regularly has been working with me on using a point buy-down system. Most 1st- time buyers think that they have to buy the points to reduce their mortgage rate, but it can also be done by the sellers. Since these buyers were already working with my mortgage broker, we decided to have a sit-down meeting about using this point buy-down system to increase their offer. The system requires some explaining, For now let’s just say that using this system creates a win-win situation.
This home was priced slightly above average, and its condition would be considered above average for the area. The comparables show that similar homes sold for around $400,000 in the past six months. However, this home had gotten somewhat stale on the market, and the offers weren't coming in. At this point, there were no buyers willing to make offers in the $400,000 range for this particular home.
The buyers that made the offer through me had credit scores hovering near 800. They had a more significant down payment to put down than many other buyers in the area. The buyers intended to apply for a 30-year fixed loan, showing full documentation. Being that they were renters with no lease, they were willing to close within 30 days, which is no easy feat in our area, where most closings take 60-90 days. These were dream buyers coming in at a very fair price. Through creative financing, we got the offer up to $388,000.
I explained the point buy-down system to the homeowner, and showed him how both parties would benefit by using this strategy. He seemed to understand fully, and said that he just needed to talk it over with his wife. The next day, the other agent called me and told me that the homeowner decided not to take this offer. Over $2000! Are you kidding me? The agent then told me that the homeowner decided that even at $390,000, he wasn't making enough money on the home. In fact the exact wording was that he was "losing too much money on the home!" I was left speechless, but here is the best part.
The facts show that this home sat on the market for three months with one broker at $439,000 and expired. It sat for another two months with another broker at $419,000 and had only one other offer that never came to fruition because the buyers couldn't get financing. The homeowner decided that if he waits a year, then the home will sell for around $450,000 - $460,000. This is based on his opinion of what's going to happen, and absolutely no factual data to support this claim.
Please don’t think that prices in Northern New Jersey are going to go back up in 1 or 2 years. I can’t guarantee anything but I don’t think there is even one expert that predicts that by 2010 we are going to see a 5% or greater gain. Real Estate prices will go back up but you have to have some patience. Please call us for an expert opinion on what your home is worth.