Middle Georgia Real Estate Blog

    A buyer told me recently that they were in the market for a house and they only wanted to look at foreclosures. When I asked them why they told me that they were looking for a "deal".

    It has occurred to me in the past that the general public's perception is that, if it says "foreclosure" it has to be a "deal", and when I heard this buyer's statement my belief was only reinforced.

    It is true that there are occasional "deals" to be had with a foreclosure but the truth is, after being involved in many REO or bank owned transactions, that many properties that are foreclosures are not great bargains.

    It's important to keep in mind that these properties are listed and marketed by local brokers and agents that know the market well. When they prepare a BPO (Brokers Price Opinion) for the bank that owns the property, they provide area comparable sales and take into consideration the condition of the home. Subsequently, most foreclosure homes that go on the market are priced at, or close to, market pricing. The ones that are priced dramatically below market pricing are usually in need of a considerable amount of work and investment to bring them up to market value.

    There are deals to be had out there and considering todays market conditions they are often found with regular sellers that are highly motivated to make a move for one reason or another.

    We all like to save money and there is a certain thrill with finding and negotiating a "deal" but when you set out with your sights on the bargain of the century, do not limit your search to the narrow selection of foreclosed properties, try to see it all!

    Way back when I was in the first grade I remember getting in trouble for acting up in class one day. I don't actually recall what I did, but I do remember the teacher giving me a note to take home to my parents that day.

    That note felt like a lead weight in my hand as I left the school yard on my way home. It was stapled together but I just had to know what it said before handing it over to my dad and facing my certain execution.

    I snuck off to a corner of the playground and began to work at the staple with my fingernail so as to ease it out without tearing the paper. Of course, my plan failed miserably and I ended up fumbling with it until I cut my finger bleeding on the note and tearing a hole in it. 

    Bottom line, instead of fessing up and getting a simple yelling at or grounding from my parents, I ended up getting my butt blistered not only for the original crime, but also for trying to hide it!

    In the real estate world when we put our home on the market for sale we are asked to fill out a Seller's Property Disclosure Statement. In this 4 page document you will be asked to disclose any problems or issues you have had with the home that you are aware of. You will be asked to make a potential buyer aware of anything from past problems with a leaky roof, plumbing and electrical issues, foundation problems, past termite activity, prior insurance claims and numerous other things that may have an impact on a buyers decision.

    Sellers often feel that this is an intrusion and that by disclosing past problems with a home they might lose a buyer.    

    The truth is that the Disclosure Statement is as much a protection for the seller as it is for the buyer and by making a buyer fully aware of any problems, you, as a seller, are protecting yourself from something coming back to haunt you later on after the home is sold. 

    So when your agent asks you to fill out a Disclosure Statement prior to listing your home, just put it all in there; the good, the bad and the ugly. I learned a long time ago that it's best to just fess up right off the bat rather than getting your butt blistered down the road!

    Throughout a real estate transaction we often hear the term "closing costs" but there seems to be some confusion as to what these costs are and who pays them.

    Closing costs are simply the costs involved with purchasing a home and are largely the buyers responsibility. They include fees such as loan origination, attorney, appraisal, court filing, credit report, underwriting, hazard insurance, title examination and various loan related items.

    Although there is not one set way to determine how much these closing costs will run, a very general rule of thumb is that they will cost roughly 3 to 3.5% of the loan amount. Example: a $100,000 loan could cost from $3,000 to $3,500 in closing costs. The best way to know for sure is to check with your lender and get a good faith estimate which will give you a break down of all costs related to obtaining the loan.

    In addition to closing costs you may have escrow funding fees which is a separate issue from closing costs. These are the funds you will need if you set up an escrow account for your home owners insurance and property taxes. You will be required to pre-fund your escrow account with a pre determined amount to be paid at closing.

    Closing costs are generally considered to be charged to the buyer but they can be paid by the seller as well. This is negotiated up front and the seller may agree to pay all, a portion of, or no closing costs on the buyers behalf. There is no hard fast rule on this and although it is common practice to ask the seller to make some sort of contribution to the buyers closing costs, whether or not they do is negotiated at the outset.

    I recently got an offer in on one of my listings that could easily be considered a "low ball" offer. What constitutes low ball? This one was  roughly 25% lower than the asking price. That's low ball.

    To put it in perspective, in our residential market the overall list price to sales price ratio is in the 96% +/- range. Of course every transaction is different and this is just an average, but this means that a home with an asking price of $100,000 should sell for around $96,000.

    As is my duty, I called my out of state seller to present the offer knowing full well the reaction I would get. When he finished laughing and chastising me for wasting his time I suggested we make a counter offer and see what happens. He promptly proceeded to instruct me to make a counter offer for an amount that was higher than the asking price! Can he do that? Absolutely, it's his house and he can name any price he wants.

    I called the buyer's agent and informed her what the counter offer was and she couldn't believe the seller had the gall to propose a number that was higher than the asking price. I then told her that the seller considered the buyers offer to be nothing short of ridiculous so he felt compelled to make an equally ridiculous counter offer. Will this buyer and seller ever come to an agreement? Probably not.

    Unfortunately, in today's market the above scenario is becoming all too common, buyers are assuming that desperate sellers will accept any offer made just to walk away. The truth is that, although there are some deals to be had, everyone has a bottom line, a point at which they can no longer bend. When that line is crossed, quite often, so are the chances of the buyer and seller ever coming to terms they can both agree on and they both lose.

    Although a real estate transaction is a business deal, in the residential realm it can also be very emotional and when a buyer submits an offer that is nowhere close to being realistic it usually does nothing but alienate the seller.

    There is absolutely nothing wrong with attempting to get the best deal possible. Negotiating is part of the process and a successful negotiation concludes when all parties walk away feeling like they got a fair shake.

    It is, however, important to note that if, as a buyer, you have found a house that you want to make a home out of, it will typically be in your best interests to submit an offer that will be taken seriously. There are a number of investors out there that are trolling the bottom end throwing out unheard of offers in the hopes of catching a steal. There is nothing wrong with that either, this is how they earn a profit.

    The point is that if you are in the market for a new home for you and your family your chances of getting a good deal on terms that you and the seller can live with are greatly increased if you remember the sage advice my broker gave me a long time ago:

    "Reasonable offers are typically met with reasonable counteroffers"

    We recently discussed the fact that our housing market here in Middle Georgia has remained fairly steady as compared to other parts of the country. And while that is true, it is not to say that we have been immune to the negative impact of the real estate crash nationally.

    We have seen a large increase in housing inventory, a stabilizing if not decreasing trend in pricing and longer market times. In addition, one look at the legal section of the Saturday Macon Telegraph will reveal a shocking number of area foreclosures, many of which are occurring frequently in some of Bibb County's more affluent neighborhoods.

    One often overlooked casualty of the housing crash is the people who earn a living within the real estate industry.  The agents, brokers, lenders, loan originators, home inspectors, attorneys, pest control workers, contractors, advertising sales persons, landscapers and more. The trickle down effect is like the proverbial crack in the dam that starts out small and just gets larger and larger over time.

    Lately I have been seeing this first hand. I recently learned of an area real estate franchise brokerage that is up for sale and in the process of closing it's doors. There is another brokerage that has closed and been bought out by a larger firm. Many of you know that I had my own small brokerage that I recently closed in favor of returning to the well established folks at Fickling & Company. Another well known area firm closed one of its satellite offices recently. I have talked to fellow agents who are leaving the real estate business for other industries or taking second jobs with steady pay check to weather the storm. I spoke with a home inspector that took out a second mortgage on his home to pay bills and others who are moonlighting as contractors for extra income.

    In todays market it truly is a "jungle out there" and it is disheartening to see because many of these are friends of mine that are really good, hardworking people that are simply victims of the times. The only real upside to this bloodletting of sorts is that we are seeing a purging of the marginal and the inept. Many that flocked to this business in the heyday, those who rushed out and got a real estate license in hopes of hopping on the "easy money" bandwagon. The ones who woke up one day and realized that this is a hard business to be successful at, that it requires dedication, passion, long hours, constant education, large doses of intestinal fortitude and an undying attention to customer service. 

    The truth is that there have been too many people running around with a real estate license, and as the ones that swooped in with all the wrong intentions drift off to other endeavors; those of us that remain, that are in it for the long haul and treat this as a profession; we wish you all the best.