Why a Renter’s Realtor Might be Your Best Guide to the New Buyer’s Market
So in case you hadn't heard, we're in the best Buyer's Market that's come along for the past generation. Rarely are mortgage rates and home prices so low at the same time. Bankrate.com is currently showing 3.78% on a 30 year fixed mortgage. Just 5 years ago I paid 6.125% on my own loan, and that was with good credit and 40% down.
Residential homebuyers are starting to pick up on what investors have already known for a couple of years. Prices are about as low as they can go. Foreclosures, which list on average at about 60-70% of full market price, are hitting the market at a faster pace now that judicial roadblocks have been cleared up. Investors have been snapping up these cheap properties wherever they can, and then turning around and renting them out to take advantage of the best Landlord's market in a decade. Rumor has it that you can walk out and pick up entire floors worth of lakefront condominiums for under $100k each.
The pace is definitely picking up, but it's having an odd effect. I recently got into a bidding war on a foreclosure in Skokie with a couple of buyer clients. Even 12 months ago this would have been unthinkable.
The property was a Fannie Mae Homepath property which had been on the market for 2 days. It was a 3 bedroom condo listed at $79.9k and in good shape. When we arrived, I took the keys from a departing agent, and I handed them off to a third agent before we left. My clients wound up adding their bids to a pile of 7 offers by the time the property had reached the end of its third day on the market. We were in the lead at $92k until we discovered a major property tax discrepancy and had to rescind.
This was not a unique situation. I'm hearing more and more from agents who are seeing multiple offers on their lower-end properties. Now that the banks have learned better how to handle short sales and the buyers have grown accustomed to the condition of foreclosed properties, the lower end properties are moving pretty quickly, and it's starting to spread upwards in price. I've seen a few new listings at my office go under contract before print this week.
My office just had a refresher course this past week for our agents in how to handle multiple-offer situations when working with a seller. They've become slightly foreign to residential Realtors who have been slogging through the slow market of the past five years. They're a little rusty at making sure their clients can come out a head in a bidding war over a property. They're not accustomed to telling their sellers that it's time to raise their price. But there's one batch of Realtors who have been dealing with a very fast paced, multiple-offer environment with rapidly increasing prices for the past 2 years already. We're the ones who work both Rentals and Sales.
If you've been following my rental stats you've seen the price increases. Last year I handled a listing of a studio in the Gold Coast which saw 10 showings and 3 applications in the course of its first 24 hours on the market, and wound up renting at $100 over list after a fierce bidding war. This year I've represented a couple of renters who've won their apartments purely on the strength of their credit reports when head to head with other renters. I've been helping my renter clients through bidding wars and counseling my landlord clients to successfully list higher than their neighbors for the past 18 months. I'm used to 14 day market times.
There's a lot of Realtors out there coming into this quickening buyer's market like grumpy bears waking up from a long hibernation. They're not ready for the new speed of the market. If you're looking to buy, especially at the low end of the market, you're better off finding a Realtor (not an apartment locator!) who's been heavily involved in rentals over the past few years. They'll be most capable of shifting gears and setting the right pace so that you don't miss out on the best deals around. They're also most likely to be aware of "accidental" landlords who might be willing to sell their off-market rentals for the right price!
Image © Amedeo De Palma 2009 from Toronto Life Magazine