The news on home values has been consistently bad for almost two years.  Articles are written about the price of homes on a daily basis and everyone has to have been exposed to these facts.  Yet, somehow, homeowners who have decided to sell their homes, continue to believe that all of those facts do not refer to their home.  They actually believe that their home has retained its’ value and, in some cases, they feel that their homes have actually increased in worth over this period of time.

Real estate professionals are consistently reporting how difficult it is to get sellers to understand today’s market and the current value of homes.  They continue to believe that they know the true worth of their home and expect it to be listed at that price.  When all arguments fail, the listing agent generally goes ahead and lists the price that the homeowner wants.  The house, of course, sits on the market without a potential buyer.

One realtor reported on a customer who fought her about the price.  It took Comparative Market Analysis figures, an appraisal, and a great deal of persuasion to get the homeowner to realize that his price was not in line with today’s values.  They wanted their home listed at $525,000 and it recently sold, after only two weeks on the market, for $380,000.  This is an extremely large drop in price but it is happening everywhere.  Of course, the upside of this situation is that they will get a lot more home for their money today when they go to purchase another home.  The only ones who truly are benefiting from the current housing market are the first-time homebuyers if they can obtain the necessary financing.

It is a generally accepted practice to use CMA’s (Comparative Market Analysis) information in arriving at an accurate selling price for a property that is for sale.  This is the practice of analyzing similar properties that have sold over a specific period of time and using their selling price as a means of determining the value of a specific piece of property.

In today’s market environment, it has become much more imperative that the market analysis be based on very recent sales.  Because the market has rapidly decreased in value, only sales information for the past 90 days is considered acceptable by banks and mortgage companies considering the financing of a property.  In the past, comparative pricing from the past year was more than acceptable.  The current market fluctuation has determined that this information must be much more current so that it reflects an accurate picture of the market in that specific area as it is today. 

One of the current issues is that, if a person signs a contract for a piece of property and then has an appraiser value the property, a much lower appraisal will cause the buyer to request a lower price, even after the contract has been signed.  This is happening on a regular basis and home values are decreasing because of it.

CMA’s have long been a tool used to evaluate the current value of a property.  Only today have the restrictions become so rigid, requiring that the sale used for comparison be very current.  In some cases, appraisers are coaxing real estate agents to give them sales prices that have not yet been recorded so that they can include them in their CMA’s.

The real estate market in the United States is hurting.  Almost everywhere, houses have lost their value and new appraisal keep coming in lower and lower.  People who must sell their homes are in deep trouble.  It is a very sad situation and no one knows when it will end and begin reversing itself.  We all hope, however, that this will happen very soon.

My friend Daniel purchased a home in 2002 for $145,000 he earned from working 31 years at a very tough job.  He considered this to be a good investment (everyone did in 2002) and sank an additional $50,000 into home improvements on his property.  He was confident that he would get this money back and a profit when the time came to sell.

Unfortunately for Daniel, his marriage problems and subsequent divorce came at a bad time. When he decided to sell was about the same time that his local real estate market crashed.  David was certain that he could sell the property for $215,000, giving him a $20,000 profit on his investment.  This, however, was not the case.  He put the property on the market for $215,000 and the real estate agent told him he thought he was overpriced.  Daniel held to his numbers and several months passed.  Things did not look good in this market.  Another conversation with his realtor convinced him to lower the price to $195,000, the break even point for Daniel.  Still, he had no one interested in his property for this price.

Eventually, Daniel put the house on the market for $169,500 which would recoup his original investment of $145,000 plus the realtor’s commission.  A sale at this price would mean that he is giving the buyer the $50,000 he invested in home improvements.  This is a very sad situation but Daniel does not seem to have any alternative.  He needs to relocate for personal reasons and must sell this property.  Daniel is currently way “upside down” on this property but this will provide a wonderful opportunity for someone else.  Let’s hope Daniel can find the person who will appreciate the advantage he has in purchasing Daniel’s property so that Daniel will be free to relocate to where his family is currently residing.  It is important to him to share holidays and special events with them.

Daniel’s property is still on the market but his real estate agent is now very encouraging.  He feels that a sale is imminent and Daniel will then be free to pursue the life he wants.  Let’s hope a closing date is set soon so Daniel can move on with his life.  His investment was not a good one but he had no way of knowing that the housing market would fall apart just when he was ready to sell his investment home.

Today’s housing market is unique. This a great time to be buying a home but a terrible market for trying to sell your home. This is why it is referred to as a “Buyer’s Market”.

Those interested in purchasing a home have an extremely large selection available to them and sellers are willing to negotiate in many unique ways. Of course, reduction in price is the norm in today’s market, but many sellers are offering to deduct closing costs, some will add value to the purchase by leaving specific items in the home which they are entitled to take, and many will move on very short notice. All of these things are being done with the intent of enticing the buyer to choose their home for purchase.

As a buyer, you have much more freedom to negotiate a deal today. One way in which you can add value to your offer is to have a pre-approval letter from a bank. With mortgages more difficult to obtain at this time, a seller wants the security of knowing that this person with whom he is negotiating really can obtain the loan. Although the pre-approval is not a guarantee that you will obtain financing, it does add something more to your offer in the eyes of the seller. A seller does not want to go to contract, make plans to move, and then find that the buyer is unable to obtain the necessary financing. The pre-approval is not binding on the applicant or the bank, but it is an indication that the bank investigated this individual, checked his credit score and income level, and all appear to be in order. A seller realizes that someone else might not be as qualified to buy his home and this could sway his acceptance of your offer.

There are wonderful deals available at this time, especially if you are a first-time home buyer. If you need to sell a home in order to purchase a new one, you might have to negotiate your own home’s price to suit the market and not get the high price at which it was previously appraised. The first time buyer, however, can take advantage of the flexibility and large selection of homes in today’s market and will be able to afford a home today that he would not have been eligible for two years ago. Waiting to buy has truly paid off for these people in the form of much lower prices. Sellers are greatly extending themselves to make their home the one that the buyer chooses. They are willing to make numerous sacrifices if the end result is the sale of their home to a qualified buyer.

Friends of mine have recently built a beautiful new home on property that they have owned for many years. They always intended for this to be their retirement home and have finally seen their dream come true.

The husband is thrilled because a golf course was built only 1 block from their property and they have become club members. This provides him with the opportunity to participate in his favorite sport on a regular basis. Their club membership also provides them with a lovely clubhouse and restaurant for whenever they have guests or want a night out.

My girlfriend is extremely happy with her home as it is located within easy reach of her children and grandchildren. She is very much looking forward to wonderful family celebrations at her new home.

Before they could move into this new home, however, they wanted to sell the home they had lived in for the past 35 years. Unfortunately for them, the real estate market has taken a serious turn for the worse since they made the decision to build new and sell old. They listed the home with a local real estate broker. They put the home up for sale and waited for buyers. No one came to even look at the house. This continued for three months and they were beginning to become very discouraged. They did not want to rent the home but did not know what to do. They actually considered living in separate homes temporarily until a buyer could be found.

Fortunately for my friends a young couple came to look at the home and was very interested in purchasing it. They asked if they could return with their parents and were back again the following week. Another week later they called the agent and made an offer on the home. My friends accepted the offer and everyone sprung into action. The young couple found a bank and applied for a mortgage. Home inspections took place and all went well. The young couple arranged for painters to come to the home so they could get estimates for changes they wanted to make. They wanted faux painted walls, new carpeting, etc. so there were many estimates needed. My friends, of course, cooperated with all of this as they were extremely happy to have buyers at this time. They could now plan their own move and would be able to continue living together in their new home.

The one thing that surprised my girlfriend very much was the financial arrangements made by the young couple. When my friends told me about them I was also very surprised.

Everyday you read in the newspapers that the banks are tightening up the availability to credit and are demanding higher down payments to avoid homes becoming devalued in the future and forcing foreclosure. For some reason this did not seem to apply to this purchase.

The bank is financing 100% of the cost of the home and also financing all of the closing costs. I know that this was an acceptable practice at one time, but I believed that this was no longer how things were being handled. When an owner has no true investment in the property it can well lead to default. This is how we arrived at the current housing and financial crises and the media keeps telling us that the banks and finance companies have learned their lesson and changed their ways. That is certainly not apparent in this situation and gives me cause to wonder if things have really changed. I hope for the sake of our economy that guidelines have been revised and financial institutions are making more sound financial decisions.