Yes, it is a buyers’ market here in the greater Mooresville and Lake Norman area. We have at least 4 times the number of listings as we should.
Given this, one would expect that it would be easy to be a buyer in Lake Norman but in fact more often than not it isn’t. In the 4 sales I had this past month, I represented buyers in three of them. And, all four transactions were much harder/more tedious than the typical sales. Why? Because the national and local economies are erratic AND because in a downward trending real estate market and an extremely tight lending market as we have right now it is as much about the listing being salable as it is the buyer being qualified.
The reality of our current Lake Norman area real estate market can be easily conveyed by sharing my own experiences and observations during this past month. I have broken it down by 6 common types of sellers and the challenges each represents as well as the additional hurdles buyers may face getting a loan. Of these 6 types of sellers, 4 represent properties that are truly not readily available to purchase.
Today’s Lake Norman and Mooresville Area Sellers
Banks: Bank-owned properties are actually one of the easiest to sell right now. Potential challenges include:
- Banks control the process and each has their own contracts and/or addendum
- There will be no repairs or home warranties so inspections become critical
- Utilities must be turned on for inspections (This can be more challenging than one might think!)
- Buyers much be prepared to replace missing appliances, light fixtures and even cabinets in some cases plus repair damages of all kinds.
- Buyers in most cases are facing a lot of cleaning, painting and yard work just to make the home livable
Short Sales: In this case the sellers are unable to pay their mortgage off at closing due to some financial hardship. Challenges include:
- The waiting game. While the seller has accepted the fact that they are going to have to walk from their home, the decision as to the ultimate purchase price and terms will only be negotiated between the banks and other lien holders and the listing agent after the buyer makes an offer that is accepted by the seller.
- The process is cumbersome and may take months, all the while the buyer waits not knowing if they will get the home.
- During the waiting period there is no way of knowing where interest rates are headed, if your loan will be approved and when you will have a closing date. Buyers must be extremely flexible. Short sales are not an option for buyers who truly need or want to move within a given time frame.
Seller is “upside down” but does not qualify for a short sale: In this case the seller owes more than the current value of the home but has a job and is technically capable of paying their monthly mortgage:
- This is one of the most common situations in our Lake Norman and Mooresville housing market right now. In many cases I will do a comparable market analysis for my buyers to determine what price to offer only to be told by the listing agent that the seller can not go below a certain amount because they do not have the money that would be necessary to bring to the closing table.
- If you are a typical buyer who decides to make a higher offer in order to help the seller because you really want the home, you will most likely not be able to finance the purchase with a traditional mortgage because the appraisal will not come in high enough and the seller is unable lower the sales price and make up the difference owed to the bank.
- In reality, these home are really not for sale because the sellers are truly unable to sell them without negotiating a short sale and they don’t qualify for one.
- Sadly, my guess is that many of these listings will end up in foreclosure when the sellers and listing agents see that the property won’t sell at their bottom line price.
Seller is “upside down” in that they paid more for the property than it is now worth but think they can get “their” price: In this case the seller has the money to sell at a lower price but they are not willing to loose money.
- Like the scenario above, in reality these homes are not available to buyers because the seller still thinks they can get a price that is higher than any appraisal will support. Hence, a buyer would not be able to get a loan at the price the seller is willing to sell.
- These are the sellers that have myriad reasons why their home/property is better than all of the recent comparable sales. I had one offer declined because the seller thought their home was worth $15,000 more than the property just down the street because they had added a large rear patio and had painted the interior. Their home needed new carpet and didn’t have as many upgrades as the home that sold. This is the Ostrich seller! By the time they grasp the reality of the market they will most likely sell for even less than my buyers offered.
Seller purchased many years ago but has an unrealistic expectation of the value of their home: In this case the seller could sell at just about any price.
- Again, in reality these homes are not available to buyers as the asking price is too high and a low offer is not welcomed.
- One of my buyers made an offer on a home that had been on the market a full year and was vacant. Their offer was 16% below the asking price or about $27,000. The sellers countered down just $2,000. Even after a whole year the sellers would rather loose money each month than drop their price!
- Like the past two scenarios, this property most likely will not appraise any where near the asking price so the buyer is wasting their time. (Mine moved on!)
The property that is for sale has no good, recent comparable sales: In this case, the seller is willing to sell, the buyer is willing to buy, but the lender is not willing to lend.
- With so few recent sales, it is not uncommon for a property here to have great difficulty with appraisals. Underwriters have been throwing out appraisals and ordering “review” or “field” appraisals which may come it quite a bit lower than the agreed upon purchase price merely because the lender does not allow for subjective value to be considered. I had this problem with a beautiful, historic home in Mooresville. While the final appraisal did come in, my buyers had to walk from another home in the same general neighborhood because the home would not appraise.
Appraisals: Even if a home is not unique, appraisals are a huge hurdle right now for both buyers and sellers. Lenders are more conservative than I have ever seen them in my 18 years of selling real estate!
Difficulty in getting jumbo loans: As I have mentioned before, loans over the $417,000 level backed by Fannie Mae and Freddie Mac are very hard to get and if a buyer can get them the rates can be at least 1% higher than a “conforming” loan.
By no means am I trying to discourage buyers from buying, I just want you all to be prepared. It may take several offers on several different properties before finding a home that not only meets your wants and needs but that is truly qualified to sell. All three of my most recent buyers now live in homes they truly love and they purchased them at reasonable prices. A little patience goes a LONG way in this market!