Why Not Wait?

I was going to title this writing, And the Beat Goes On, because it is going on – and on and on. With over 800 properties on the market now, depending upon who’s counting, there seems to be no end in sight.

There are not that many foreclosures for sale and most of them are overpriced junk, but the number of properties for sale in the $1.2mm to $3.7mm range is staggering. Short Sales may be on the rise and some banks are realizing it is better to be reasonable, cooperate with the mortgagor, cut their losses and not go through the costly foreclosure process. However, Short Sales still present some risk to a potential buyer.

There are some great buys out there right now in water front properties; you can even buy a Lagoon front property for $950,000 that is attractive and in good condition. But there are still too many properties that are unrealistically priced for this market and the level of competition between similar properties. I think part of the reason for overpricing is because July and August are the months of hope for sellers when the wealthier vacationers are here and emotional purchases are at their highest level. Of course there is always the ‘we don’t have to sell’ test the waters mentality that wastes everyone’s time, foolishly spends the listing broker’s ad money and confuses the market in general not to mention the real estate agents out there who do need to sell to stay in business.

Although I do not see a significant continuation in the downward spiral of prices I can see that the game plan for many sellers is to price their properties very high to start and then reduce the price giving the appearance that they are radically discounting their properties. That strategy is working when selling to the uninformed buyers. On the other hand, those properties that have been priced sharply and ahead of the market are getting an immediate response and in most cases multiple offers are being presented on those properties and they are selling quickly. You will also notice a trend for the acceptable differential between asking and selling price to be about 6%.

I think this is a great time to buy if you find your ‘dream home’, but if you have not then I say why not wait? Every week I hope and expect that the number of new properties coming on the market will slow down or abate, but they just keep coming. This week there are very view price reductions but still 28 new properties are being introduced and added to the inventory. It's been like this for many weeks now as the inventory continues to grow. This is just in time for the beginning of the two biggest months for tourists and big spenders – or so everyone hopes.

Once Labor Day has come and gone, or actually after the 3rd week of August I think sellers who have not made a deal are going to start worrying. It happens every year. Those who ‘don’t have to sell’ will probably take their properties off the market – again, around Thanksgiving and try again in 2012.

There are 568 single family homes available right now and that does not include the 36 properties that are either being negotiated or under contract to close. Perhaps I have answered my own question and maybe I should have titled this commentary, Why Wait?

A Short Commentary on Short Sales

Should an agent disclose a Short Sale situation? In a recent court ruling it was determined that "When a real estate agent is aware that the amount of existing monetary liens and encumbrances exceeds the sales price of a residential property so as to require either the cooperation of the lender in a short sale or the ability of the seller to put a substantial amount of cash into the escrow in order to obtain the release of the monetary liens and encumbrances affecting title, the agent has a duty to disclose this state of affairs to the buyer, so that the buyer can inquire further and evaluate whether to risk entering into a transaction with a substantial risk of failure." Currently, about 70% of all Short Sale contracts result in NO SALE.

The key word of course is ‘aware’, and most agents hear no evil, see no evil and speak no evil. Make sure you do your homework, and make sure you are represented by an Exclusive Buyer Agent who will look out for your best interests.

Short Sales Are Not A Slam Dunk

Back at the end of January I wrote a brief e-Newsletter editorial about the ‘Short Sale’ phenomena, how it works and how the Urban Housing Corp. in Roxbury, MA was working to help suffering homeowners to work out their situations before losing everything. I also talked about how difficult and frustrating it could be when the mortgagor owed significantly more money than the current market value, I mean hundreds of thousands of dollars in some cases. I ended by saying “The good news is that Martha’s Vineyard is not one of these distress markets flooded with upside-down investors. Most attorneys here know very little about how the short sale process works, and personally I want no part of it.” Well, here we are at nearing the end of April and I still want no part of short sale negotiations, not that I will not engage if a buyer client insists, but now we have an increasing number of home owners here who are facing foreclosure and are offering their properties as short sales.

At the end of 2007 and the beginning of 2008, lenders were more willing to accept significant short sale losses and move on, but I believe that is not the case any longer --- especially here on Martha’s Vineyard. I believe we are walking in the valley of this down market and the turnaround is clearly in sight. That means lenders are going to be stubborn and if they cannot sell closer to their investment, they will take back the properties and wait it out. Here is an article that appeared in the Wall Street Journal today that further addresses Why Lenders Are Leery Of Short Sales.