Since the beginning of 2013 the Reno-Sparks market for single family homes has seen a very competitive market with many homes selling the first day on the market or before they even reach MLS. The median price in the Reno-Sparks market for January 2013 was $180,000 as reported by the Reno Sparks Association of REALTORS. Here are some of the things buyers should consider in this competitive market.
TYPE OF FINANCING
Since the beginning of the year to today here is a graph that shows what types of sales are occurring and what type of financing is being used for home purchases under $200,000.
|
Short Sales |
REO |
No Conditions |
|
|
Cash |
38.69% |
32.79% |
27.82% |
|
Conventional |
36.18% |
32.79% |
41.94% |
|
FHA |
22.11% |
27.87% |
20.97% |
|
VA |
3.02% |
6.56% |
9.27% |
|
Cash & Conventional Combined |
74.87% |
65.57% |
69.76% |
So basically what this tells us is that a large percentage of the homes selling since January 1 have been financed with either cash or conventional loans. Buyer’s using FHA or VA financing are at a competitive disadvantage given current market conditions. This is often due to little or no down payment and the additional issues caused by stricter appraisal/property condition issues required by FHA/VA.
My recommendation to FHA & VA buyers would be to consider saving money to get a larger down payment and take advantage of conventional financing. Often times convention financing is going to be more cost effective due to lower or no mortgage insurance costs. Many lenders offer 5% and 10% conventional financing, but the more down the better.
CLOSING COSTS
In a competitive market the sellers will be looking for an offer that gives them the highest net possible. This will be true for all types of sales – short sales, REO and no condition. So buyers when you are sitting down with your lender make sure they give you an estimate of ALL your closing costs and that they give you a “cash to close” figure that would include the closing costs and your down payment. Many buyers, especially FHA buyers, are being told that the seller will pick up their closing costs. These lenders are out of touch with current, competitive market conditions. Buyers should be prepared to pay their own closing costs in our current market.
SHORT SALE TIME LINES
With over 40% of the sales this year so far being short sales, buyers should be sure to get educated on the short sale process and what to expect PRIOR to writing an offer on a short sale. Sellers will be looking for buyers that are willing to remain committed to the transaction for the long haul. Our offer contract provides for a time period in which the buyer is committed before being able to exercise their right to cancel the transaction. 60 days would be a minimum for that I would recommend for most short sales and if the buyer really loves the house and is willing to wait for short sale approval then make it longer.
NEGOTIABLE ITEMS
Pay close attention to how the negotiable items on the contract such as escrow fees, transfer tax, HOA transfer fees, inspections, home warranties, etc. are being split. Your agent should review these costs with you and discuss the competitive advantage of paying these or splitting these with the seller.
BEST OFFER FIRST
In some cases you will want to make your best offer first. With short sales and no condition sales sellers have the option to go back and ask all buyers to submit their highest and best. Often times these sellers just want to pick one and be done. Don’t risk not getting the property because you didn’t make your best offer first. REO or bank properties often times go back to all buyers giving them the opportunity to submit a higher offer.
THE BOTTOM LINE
The bottom line is that when a seller receives multiple offers most good agents will compare ALL of the terms of the offer including net proceeds, timelines, financing type, closing timelines etc. Be sure that you have a chance by making sure you put your strongest offer forward.
Buyers if you need help being competitive in today’s challenging market contact me today.
