Celebrated Realtor Barbara Corcoran recently had some great observations on the Today Show in Jan 26th 2009. Her comments are very relevant to the Tampa housing market. Below are five myths held by home buyers, and then five myths held by home sellers. See Video.
Buyer myth No. 1: The longer a home is on the market, the more you can negotiate.
Corcoran says: “When buyers ask how long a home has been on the market…they think 6 months means they can negotiate the price down; whereas it more often means the seller is stubbornly holding on to their price.” This is entirely true, as many Tampa homeowners refuse to acknowledge the market decline and cling to the idea that “it just takes one buyer” or “my house is special” and hence they do not price a home to sell.
Buyer myth No. 2: The sellers today are desperate.
Corcoran says: “Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. I’m being transferred to Dallas is a very different answer than -We’d like to find something bigger. The first homeowner is hot to trot.” Corcoran’s point is well taken, as many Tampa sellers would like to sell and move up to a bigger homes to take advantage of this buying opportunity, but they do not “need” to sell.
Buyer myth No. 3: You can’t buy a home today with less than 20 percent down.
Corcoran says: “FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.” This is done routinely, where a Tampa home seller might be be asked to contribute up to 6% of the purchase price towards a buyer’s closing costs and prepaids: hence buyers can still purchase a home with very little down.
Buyer myth No. 4: You need good credit to get a good loan.
Corcoran maintains: “Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.” Not so much. While FHA requirements have traditionally been less stringent, they have been requiring more documentation and are implementing higher standards. Team Bohannon’s best advice: talk to a recognizable lending institution and obtain a Pre-Approval letter to make sure you understand the true costs and availability of loans because the programs have been changing rapidly.
Buyer myth No. 5: You shouldn’t buy before prices have bottomed.
Corcoran says: “You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.” Once again, we agree – it is impossible to time the market. We will know only when prices have bottomed out 6 months after the turn happens, and by that time interest rate moves may be more important than prices.
Seller myth No. 1: Now’s the absolute worst time to sell.
Corcoran says: “Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.” Yes – the case for trading up is compelling. In Tampa, we have seen the number of sales begin to rebound, thanks in large measure to a 30-40% decline in prices. If you plan to sell within the next 3-5 years, we think that today’s market is superior to what you will see during the next few years.
Seller myth No. 2: Never respond to a low-ball bid.
Corcoran says: “All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.” Once again, Corcoran offers solid advice. It is not where you start, but where you finish. Always respond.
Seller myth No. 3: The first offer is never the best offer.
Corcoran says: “Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.” True! The first offer is usually the best. We have lots of data on this point….ask to see our stack of proof someday.
Seller myth No. 4: ‘I can always reduce my price later.’
Corcoran says: “Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.” Agreed! First impressions matter. Sellers need to enter the market with a splash to capture the best buyers out of the gate; whereas multiple price cuts are akin to chasing a slinky down a staircase.
Seller myth No. 5: Before you refinance, shop around.
Corcoran says: “You can if you want, but you’ll usually get the best deal from your current lender. And you’ll be able to negotiate your closing costs.” We are not so sure about this one, as the re-fi options for homes in soft markets are a more challenging proposition. Some lenders have taken steps to limit downside risk in declining markets.
– By Dale Bohannon with quotes from Barbara Corcoran @ MSNBC.com