Well folks, I figure we might go ahead and look into who is buying houses out there right now. In any business endeavor, it is crucially important to know your consumer, and in the case of For Sale by Owner, you consumer is a homebuyer. But who exactly is buying homes these days?
For most sellers, you’re going to be dealing with a lot of first time homebuyers. Since the housing market seems to be on another downward trajectory, many current homeowners will be reluctant to “move up” and take on another possibly more expensive mortgage with houses prices dropping. This “move up” demographic was once a critical part of the housing market dynamic, but current economic stresses have lessened their impact.
From what I can gather from friends and other studies online, the major house buying power in the country lies within the first-time homebuyer. For the most part, this means young adults born in the 80s to 90s. This is called Generation Y. Right now, many of these young adults are finding their way into the business marketplace with college degrees. They are young professionals, they are green enterprisers, they want things to happen quickly.
This group understands the wonders of interconnectivity and how it has changed the way we operate on a daily basis. They are going to be looking for a house that echoes these sentiments. It’s no wonder that recent studies have indicated that nearly 90% of potential homebuyers are looking for their house online.
So in order to keep with this savvy, time-saving bunch of first timers. For Sale by Owner need to act accordingly. A good start would be to list your house online and highlight all of the “green” features. If you don’t have any “green” features, it might be time to install that energy star rated dishwasher, or those solar panels you’ve been considering.
Understanding your buyer is the key to getting your house sold quickly in this market. The more you cater, the more interest you generate. To read more on Gen Y and how they are handiling the market, click here.
Archive for July, 2010
Knowing Your Buyer: The First-Time Homebuyer
Saturday, July 10th, 2010THE DOUBLE DIP!!!
Thursday, July 8th, 2010If you haven’t hear of it yet, you must not be reading the blog roll, online newsrooms, or even looking at Yahoo!’s homepage. Everyone is talking about it from experts, all the way down to the first-time homeowner: the Double Dip.
What is the Double-Dip you may ask? It’s a polite term for the impending secondary deflation of the U.S. housing market. During late 2009 and early 2010, things in the housing market were looking up. It seemed that government actions had put a halt on foreclosures and actually helped a few folks afford to buy houses Home prices began to rise again and we were even seeing a little bit of optimism within the housing industry’s talking heads. But then, around a month ago, tones changed. People started bringing up the fact that this housing recover is a fleeting notion.
Without jumping the gun, as 2010 half term numbers have yet to be compiled, it seems that we may be heading down the other side of recovery hill. According to Zillow.com, home prices on a national average are showing a slight decline in the month of May. Of couse that’s an average, as numbers vary greatly from state to state—some states are actually increasing home prices.
Many are attributing early 2010 optimism to the government funded Homebuyer Tax Credit. This program offered huge incentives for homeowner to move up and those that didn’t own homes to purchase one. Also contributing to the boost in numbers are historically low interest rates—somewhere near 4%.
We were on the recovery from record lows, and now were heading back down, hence: The Double Dip.
So what does it mean? Well, most obviously, housing prices will begin to fall again, putting people into deeper debt, probably more underwater mortgages, and a continued stagnancy in the housing market. For FSBOs this could create some trouble in selling your house and setting your asking price. Hopefully, this second dip won’t be such a trying one.
Less is More…Again!
Tuesday, July 6th, 2010I am hereby declaring the end of an ideal.
America’s modern economy made it financially possible and ethically conceivable for every person in this country to own an extravagant home–not that there’s anything wrong with that. One of the freedoms and luxuries afforded to the capitalist is that they are can live according to their means and no one can tell them otherwise. This of course comes with responsibility, one that we have been all too ready to neglect.
The economy was looking good, incomes were on the rise, banks basically giving away mortgages, and luxury homes were popping up all over the country. Every person, if they wished, could own a two story 1600 sq ft., four bedroom mansion-house with a pool three car garage, a gate, on the lake front—even if the space and excess wasn’t a necessity. In most cases it wasn’t.
The housing market’s recent downturn is leading the country and homeowners back to an ideal of modesty. No longer are we looking for massive houses that are going to suck up energy and use water. No longer are we looking to buy the biggest SUV we could find as we were back in the 90s. No longer are we mindlessly spending money and consuming resources. A certain consciousness has been breathed back into the American consumer in this time of scrimping and saving.
I was reading an opinion article from the NY Times, and author Jayne Merkel brought up an interesting correlation between modest post WWII housing and the extreme poverty faced during the Great Depression. The 1930s taught Americans to live frugally and with less, and the same can be expected from what people are now calling the Great Recession. Things are changing: we are conserving energy, buying more efficient cars and appliances, and starting to consider how our homes are effecting our environment. It is completely conceivable to say that Americans will soon change the way they buy houses.
Although mortgage rates are at historic lows for FRMs, people still aren’t biting. The financial stress is too great right now. People who currently own homes, frozen by a dilapidated economy and scarcity of jobs, are unwilling to move. The housing market is under siege by foreclosed properties, shadow inventory, underwater mortgages, and financially inconvenient houses. The next generation of homebuyers are coming into a market riddled with problems and are reluctant to jump into owning a house. They are a more frugal and consumer conscious group who are looking for good communities in urban areas, not the expansive suburb dwellings that were so popular in the last quarter of last decade. Much like the Great Depression, this current economic downturn will shift the way we think about owning a home and what it means to live the American Dream. And I think this means a more modest life without the suburban extravagance of before.
Pretty soon, I think, less will be more again.
At the Root of Real Estate Negotiations
Monday, July 5th, 2010Hope you all had a very wonderful fourth of July!
With all of the work that goes into selling a house For sale by Owner, it would be a shame to see it all fall through on a botched negotiation deal. When dealing with offers from multiple buyers, it is important that the seller have a discreet knowledge about exactly what to do when you get an offer you like, and how to negotiate an offer to sell.
Since their iconic highs in 2006, home prices have dropped. As such, many homeowners are inclined to price their homes too high causing buyers to be skeptical of both the home’s worth and the seller’s knowledge of the home selling process. It’s a phenomenon occurring more and more frequently these days, with such a pessimistic market. You’re best bet to avoid any ongoing negotiations with your house is to price it fairly, honestly, and give it the value its really worth. That’s the bottom line. But just to be sure, let’s work through the notions behind negotiations.
Competition (I think I’ve said this before) breeds success, and if you’re lucky enough in this market to have a bidding war breakout over you house, then revel in it and inspire you’re buyers to compete further. Add incentives to sweeten the deal up until that contract is signed and sealed. However, if you’re on the other side of things, if your market is like much of the rest of the nation and your buyers are out there looking for a deal, then you will have negotiate prices.
Negotiations usually occur when a buyer makes an offer and it is lower than your prospective price. Buying a house is a huge investment and people want the best deal they can get, especially in this market. Buyers have reservations—the only way to deal with it is to negotiate properly. For instance, you have a house listed for $425,000 in a nice Chicago suburb, full appliance included, new roofing, relatively now structure, and your first offer comes in from a buyer. They’ve offered you $410,000. Not your ideal price, but you’re willing to negotiate with them. After all, if you priced your home right, you probably left a little room for bartering.
What then ensues is the usual back and forth you would expect from a negotiation: one party suggests a more appropriate price, perhaps throwing in a few perks that could save the buyer a few thousand clams, the buyer then makes a second offer attempting to zero in on their ideal spending price. Eventually, if all goes according to plan, the two reach a deal, both happy and satisfied with their sale and purchase, respectively.
The best way to make sure that your negotiations go according to plan is your approach and preparation. It’s not so much exactly what you offer during the deal–though that is important–but most times negotiations are botched because the seller gets into territory he or she is unprepared for. Have a floor price that’s as low as you’re willing to sell for. That way, when you get into negotiations there won’t be any surprises. Plus, it helps to have a firm hand with the buyer, saying, “I’m not going to go any lower than…” They will know you mean business and either meet your demands or move on. I don’t endorse driving buyers away, but if you’re not going to get at the very least your minimum price, then by all means, don’t sell!
Another tactic that some buyer’s agents might try to employ when working a deal is to rush the seller. They might say that they have a buyer locked down, but you, as the seller, only have a certain amount of time to decide if you would be willing to sell for their offer because, at a certain point, the offer goes off the table. DON’T FEEL RUSHED! The worst thing you can do for your sale is to rush into an agreement. If someone is going to buy your listing, they will take the time to do it right. A lot of times you will see realtors rushing sales in order to make deals for commission. The opposite can be said for buyers working without an agent. They tend to be more willing to take their time and negotiate a good offer for both parties. Never feel pressured to make a sale. Patience is a virtue after all.
These are a few legitimate tips and approaches that can really help smooth out your negotiations process. If you are a first-timer, the best suggestion I can make is to take in all of the experience you can. There is no exact science to negotiations, and every deal is circumstantially different. But the more aware you are of exactly how you are working with your buyer, the more you will understand on how to negotiate successfully.
Last, but not least, negotiate honestly. I can’t tell you all of the tips and tricks online that are suggesting lying and faking other offers to boost competition. It’s not right to your potential buyer and it’s unethical for the practice. Plus, if you negotiate reasonably, and price fairly, you will get a good deal on your property.
