Don’t let the media fool you, it is NOT a buyers market. Maybe it is, if, and only if, you are willing to wait month upon month upon month – you get the idea – for approval from the bank for that short sale property. There are good deals to be had, but you have to be willing to wait. A lot of people think they can, but since the process is so long and the banks are so overwhelmed, potential buyers are pulling their offers and moving on i.e. when an equity home is on the market people are overpaying.
When the short sale buyers pull their offers they are so ready to buy a home they act irrationally. Irrational in the fact that they are willing to pay well above the asking price for no other reason than they HAVE TO BUY A HOUSE BECAUSE THE “EXPERTS” ARE TELLING THEM TO BUY NOW. Irrational because they are willing to waive appraisal contingencies – for example the house appraises at $450,000, but sells for $510,000. Typically a bank won’t finance a loan for more than the house appraises for, but like most things there are ways around this. You buy a mortgage origiation point or more likely the bank will require you to make up the difference in cash. Of course, you can always pay in cash, in full, and believe it or not people do. We lost a house to an all-cash offer. We were also asked by a sellers agent to waive the appraisal report, needless to say we did not put in an offer, but four others did. WTF???
Let’s not forget those that are going to rush to buy and close escrow before 30 November 2009 just so they can claim the $8,000 tax credit for first-time homebuyers. The way I see it, and I could be wrong, I think there is going to be a mad rush and even more competition in the next two months. Basically you have to be in escrow no later than the end of October if you wish to claim the credit. As the law is currently written any home purchase that closes escrow beginning 1 December 2009 is not eligible to receive the tax credit.
I realize the Southern California market is markedly different than 95% of the rest of the country. However, by rushing to buy and pushing prices back up is doing no one any favors. If you buy a home for more than it’s worth that is exactly what you are doing. Even if it’s worth that price to you, it’s not a sound financial decision. So basically all this irrationality coupled with so many short sale/REO properties is making for a very small sellers market. As my husband likes to quote the age-old proverb: “a fool and his money are soon parted.”