RISMEDIA, November 17, 2010—Five years ago, a serious buyer who was pre-approved for a mortgage loan typically spent three to four weeks looking for a home and usually visited 15-20 homes. Now the search can take much longer with the amount of inventory on the market. Five years ago, a serious buyer who was pre-approved for a mortgage loan typically spent three to four weeks looking for a home and usually visited 15-20 homes, according to metro Chicago real estate agent Sarah Ritter of RE/MAX Properties in Western Springs, Ill. Now, says Ritter, “people tend to look much longer. They have a hard time saying ‘yes.’ “One couple I’m working with has looked at 42 or 43 houses and still hasn’t made an offer. But that isn’t unusual in today’s market.”
Kathleen O’Reilly of RE/MAX Horizon in Elgin, Ill., reports she recently set a personal record by showing one client 45 houses. The client then made an offer and purchased a home—the first one O’Reilly had shown him. That first home had everything the buyer wanted, according to O’Reilly, but he had to look at 44 other homes before feeling confident he was getting the most for his money.
“What I’m seeing,” said Ritter, “is that buyers have read a lot about foreclosures, short sales and how desperate sellers are. They feel there is this fabulous deal out there, a mansion with all the bells and whistles, and they are going to get it for $210,000. They are convinced the next house they look at will be a better deal, and with so much inventory now on the market, they keep looking and looking.”
How can buyers find their way in the current marketplace, with its shifting home prices and an extensive inventory that includes many distressed properties? Here’s some advice on how to speed up the process from experienced real estate professionals at RE/MAX.
-Do enough looking to get to know your local market. Mark True, an agent with RE/MAX Rock Valley in Oregon, Ill., thinks buyers benefit by looking widely, but are sometimes tripped up by inflated expectations. “Especially in a smaller market like ours, the inventory is limited even if it is large by historic standards. Each local market has its own character, and buyers must adjust their expectations accordingly. Otherwise they continue looking for a home that doesn’t exist,” he advised. At the same time, True urges buyers to do a fair amount of looking because it gives them an understanding of the market and the confidence to make a decision.
-Let your emotions help you. Too often today, buyers aren’t letting themselves fall in love with a home, according to Deborah Cassidy of RE/MAX Showcase in Lake Forest, Ill. “They are only looking at price and condition, and that contributes to their uncertainty because they always feel there’s a better deal out there,” she said. “Leaving emotion out of the equation makes it difficult for buyers to commit to a purchase.”
-Decide if a distressed property is really right for you. Foreclosures and short sales offer buyers great value when it comes to price per square foot, but these properties tend to have their own limitations, according to Dan Firks, an agent with RE/MAX of Naperville in Naperville, Ill. Foreclosures often, though not always, have serious condition issues and are almost always sold “as is,” meaning the seller won’t do anything to address those issues. As a result, buyers may need to carry out extensive repairs after purchasing. Short sales, while usually in better condition, can take months to get to the closing table, and in at least some cases these transactions eventually fall apart because the lender, seller and buyer can’t agree. “Buyers must decide if they have the patience and flexibility to pursue a short sale and the skills or resources to deal with repairing a foreclosure,” advised Firks.
-Don’t focus too heavily on price. Firks gently urges buyers not to become totally focused on searching out the best possible price because, “when they do that, they may fail to consider the other benefits of purchasing—the tax deductions they’ll get when they own rather than rent, the amazingly low mortgage interest rates currently available and the benefits of living in a home and a community that fit their family,” he said.
-Be ready to negotiate. According to Kathleen O’Reilly of RE/MAX Horizon, Elgin, buyers can miss out on a great home if they don’t initiate a negotiation. “When buyers find a home they like, I encourage them to make an offer at a price they are comfortable with, even if it is well below the listed price,” she said. “At worst, the seller won’t negotiate, but in this market that is unlikely. Sellers don’t want a viable buyer to walk away. If a negotiation is initiated, it often ends up in a place that makes the buyers happy because in this market sellers have to do most of the compromising.”
-Get plenty of advice but trust the professionals. The current housing market is complex and can be confusing. Sarah Ritter of RE/MAX Properties, Western Springs, urges buyers to realize that not all the advice they get has equal value. “I want buyers to talk to their friends and family about a potential purchase, but at the same time, that advice should be taken with a grain of salt because unless the advice comes from a local real estate professional—a lender, agent, inspector or appraiser—it won’t be grounded in detailed knowledge of the current market.”
-Don’t let negative comments about the housing market scare you off. Those who mean well may wish to warn you about the downside risks of the housing market, according to Mark Zipperer of RE/MAX Edge in Chicago. “However, buyers shouldn’t lose sight of the many positives in the current market, such as the fact that home affordability is at its highest in decades and that investors are flocking into the market to snap up bargains in all-cash purchases,” Zipperer said. He urges buyers to keep their eye on the numbers that directly impact them—property prices, interest rates and how those translate into monthly payments.