Portland Sees First Dip |

Portland Sees First Dip

By: Michelle, on March 2721, 08

So the time has finally come. We are seeing our first real data on price decline. I think those of us that work in the industry full time, those of us that are selling our homes, and those of us that have recently made a pretty good buy or are facing short sale or foreclosure have already known this to be true for quite some time. Despite RMLS’s optimistic broad stroke policy towards reporting data, our market has been showing all the signs for months now. Truth is, we’ve seen consistent month to month average price decrease since July of ‘07 (Price-Shiller).

But I’m not going to spend a lot of time debating who has more accurate data ( whole ‘nuther post ). As is my standard form, I’m going to detail what this means for buyers and sellers.

Sellers

Whether you have to sell, or choose to sell to take advantage of the lower home prices, move forward knowing that it’s a buyer’s market. With declining prices, do not put an early ‘07 price tag on your home. If your agent shows up with comps any older than 6 months, show them the door because they are probably disillusioned about real time market conditions. The only exception is that they better have some fancy math calculations that demonstrate the rate of decline in prices for your particular area, and then apply them to the comparable sales data prior to six months ago. This is when it is crucial to hire an area specialist. Follow their advice in regards to pricing and preparing your home for sale.

Be proactive and paint, prune and primp your home until it sparkles. Any potential repair issues should be addressed before the first prospective buyer sets foot through the door. Most home inspectors will perform a seller’s pre-sale inspection, just be aware that you will need to supply this to potential buyers as a matter of disclosure. But in the spirit of being proactive a home inspection with evidence of all repairs being completed is a very nice selling point. Also, ask your agent about offering home warranties, and be willing to kick in some incentives.

Lastly, be realistic about market conditions when it comes time to negotiate. Very little is selling for full price. You may have to pay some closing costs. You may have to leave behind that gorgeous cut glass chandelier brought over on the Mayflower by your ancestors (hint: replace those items before you list your home). Most importantly, don’t take the negotiating personally. It’s a buyer’s market and the few that are out there are picky and asking for as much as they think they can get. Especially with this most recent data, initial offers are going to start coming in “crazy low” as we say around the office.

Buyers

Do your homework, and do not buy unless you intend to live in the property long term (at least 5 years), and do not scrape together your last few pennies to buy. If you do not have at least a few months reserves in the bank, low debt, and favorable credit scores, you may end up paying an interest rate that could potentially pose a problem in a declining market that is threatening recession. 20% down is a safe cushion in the event that you do need to sell or refinance before the market starts to improve; less than 10% down could possibly put you in a short sale situation in the near future should you have an unexpected life event like a job transfer or illness.

I cannot emphasize enough how important it is to get not only pre-qualified, but pre-approved by a knowledgeable, seasoned loan officer or loan broker. We are still not out of the woods with the major upset in the mortgage industry. Go with an established bank that offers a wide variety of programs. Do this before you visit your first prospective home. Next, get signed up on an email listing service through your real estate broker. There are an inordinate number of homes to look at and figuring out what you must have and what you can live without will save you lots of time and frustration. Ask your real estate broker to help you understand your specific market area so that you know a good value when you see one.

When it comes time to negotiate, be realistic. Yes, folks are writing “crazy low” offers, and negotiating closing costs, refrigerators, plasma t.v.’s and the like into their offers. Don’t forget there are real people on both sides of the equation. Not that you shouldn’t take advantage of a buyer’s market, but understand that at some point a seller is apt to say that it’s just not worth it, or will get tired of the back and forth and just put an end to the negotiating process. This is where you have to trust your real estate broker and follow their advice. And as stated above to sellers, remember that negotiating is not personal, it’s two sides coming to agreement. You may not get everything you asked for, but I guarantee you are getting a heck of a better deal than buyers in 2006 and early 2007 did.

Investors

Do not buy “flips”. You will lose your shirt short term if we have not yet seen the bottom of our market. It is a great time to buy rentals, though. With prices declining, short sales and foreclosures on the rise, and rent value increasing, patient investors can make some great buys and position themselves very well for the next several years. Now would not be a bad time to unload or re-fi a rental property that you have gained significant appreciation on, and 1031 exchange into two or three units. As stated above, be realistic about both sides of the transaction(s). Work with an experience real estate broker as well as an experience property manager. Yes, I said property manager; it’s the single best investment you can make in your rental properties.

For more about the Case-Schiller report you can read the article by Ryan Frank in the Oregonian here.

Opinions expressed in this article are the opinions of author, and not to necessarily the opinions of Meadows Group Inc.
All rights reserved on all original content, non-original content is given credit | Michelle Berry | 2009

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