Sunday, January 4, 2009

WHAT'S IT GONNA TAKE IN 2009?

WELCOME TO 2009!

The deals are out there. But there's a lot of "fool's gold" in the market as well, and you must be able to discern between the good, the bad and the ugly.

So how do you find the real thing? Patience, persistence, and a little luck.

Are you thinking it's time to get serious about buying a home in the Denver area? Here’s what you can expect to find as we kick off 2009...


* 30-year fixed rates in the 5's - historic and (I believe) temporary

* Bidding wars over the best deals priced below $250,000 - private party or REO.

* A slower market up to $400,000, increasingly sluggish up to $600,000, and just about totally dead at price points north of that.

* Private-party sellers who continue to be in denial about the impact foreclosures and the stock market crash have had on their values.

* Short sales that look pretty behind the glass, but rarely close.

* REO's that run the spectrum from well priced in good condition to poorly priced in terrible condition.


Obviously, there are a lot of "wrong" choices for buyers on the market today. So how do you find a good property at an attractive price?

Here are a couple of strategies that might help.


Be Willing To Wait - One lender’s current policy on their REOs is to accept no offer below list price for the first ten days of the listing. Regular sellers tend to react the same way. You regularly hear about sellers who get a good offer during the first week of their listing, only to blow it off, and then regret it later.

If you want a discount off the list price, you’ll probably have to wait them out. (This also means you are going to lose some properties, though.) A good rule of thumb is about 1% per week. If you want it for 10% less, wait 8-10 weeks. It takes that long for the sellers to come to their senses. But remember that, even then, it only works if the seller has enough equity to sell and bank-owned listings that sit on the market that long normally have serious issues.

Look at the Higher-Longers - If you are interested in a private-party resale (which will normally be in better shape than REO inventory), understand that a lot of sellers are tired, frustrated and losing faith. When I take listings, I talk with my sellers about the fact they have "one shot at the parade" - in other words, listings get the most attention in the first 21 days they are on the market. After that, it can be a long, slow slog before an offer comes along.


Negotiate Later - I call this "double negotiation", and it's a common tactic in a buyer's market. Round one is presenting a clean offer and negotiating on price. Round two comes after the inspections, when we negotiate repairs, credits and concessions to keep the deal together. The fact is that, under the Colorado real estate contract, the Inspection Notice allows us to renegotiate based on the condition of the home. Of course, a buyer's emotional attachment to a property goes a long way toward determining whether this is a viable tactic, but it's one I put on the table because I am here to aggressively protect the interests of my buyers.


Last week, I closed on one of the most complicated deals I have negotiated in a long time - and the seller was a bank. We literally obtained thousands of dollars in "11th hour" repairs in unbelievably short time frames.


The common perception is that banks are selling ‘as-is’, and no repairs or credits are possible, but I am finding more and more flexibility as banks see their inventories (and losses) rise.

In no way am I guaranteeing that banks will open the vault to save a deal, but I'm seeing a lot more openness to discussing it. But you have to ask, you have to be serious, and you have to be willing to walk if the bank takes a hard line.

Just before Thanksgiving, Fannie Mae and Freddie Mac put a moratorium on new foreclosures until January 9. It's possible we'll see one more surge of inventory this month, and then President-elect Obama will take office with the biggest stimulus / bailout / foreclosure-prevention program in American history.

Whatever you think of conditions as they exist today - overvalued or undervalued - you're going to find out if you are right in 2009.

Is this your moment to catch an incredible deal? If you're an investor, do you like buying into the tightest rental market in a decade? If you're a first time buyer, do you like the idea of a $7,500 tax credit and foreclosures that are priced 20% or more off their 2004 peaks? And no matter where you're coming from, aren't 30-year fixed rates in the 5's ridiculously appealing?

In the end, we each have to make our own decisions about how, where and why we invest our money. But no matter what camp you fall in, the time to get educated is right now.