The State of Real Estate (landscaping, buyers, price)

[catluvr]

Here's the deal...We sold our house for 200K. Valued and appraised at 229K. Starter home, 3bdr, 1ba. We spent about 3 hours figuring out that a family in a starter home cannot pay 1600.00 monthly. Banks are not giving loans to people for starter homes. You have to have a lot of cash down and/or owned something previously or be rich to get a loan. Blame the banks. Starter homes are not selling, so midsize homes are not being bought which leads to larger homes not being built either.

Minnesotans need to wake up and realize their homes are way overpriced. The only way we are going to have a resurgence in this R.E. economy, is to come back down to earth with pricing. We calculated that if a young family had a life savings for a house of about 6000., the bank will loan about 193K based on a bunch of calculations. When we realized this, we immediately lowered our price because we speculated that people were interested, but couldn't get financed. As soon as we put it at 200K, we had 2 bids. One bid came in just where we wanted it to be. They were greatful we lowered it becasue they could not get financed at 214K where we had it previously. 200K was the magic bullet that put them in our house. New appliances, snowblower, washer/dryer, WH, Furnace, etc. BTW: house passed 3 inspections (private, state and county). It went as a hud home with first time buyer financing incentive. You need to target your market and price it accordingly.

What a steal by our standards, but priced right for this market. .33 acres in Eagan. Wow. There are now 2 happy couples, opposite ends of the US

If everyone figures what people will really pay for their home, I think the market will move again, especially the starter home market.

[Robert P Stewart]

AVGuy - Yes, people seem to prefer new construction. That, and young couples really aren't leaving the burbs.

In my opinion, it's all horse crap (which seems to be my response to a lot of things lately). Many big box builders here sell their product with highly accessorized and trendy models. I've seen structural problems inside of 5 years with these. I've seen drywall seams in 2. Malfunctioning appliances, leaky windows - you name it.

Give me a 1950's warhorse that was built by skillful labor using quality materials. The Twin Cities are full of real gems built by Norweigan bachelors... and I think that's a good thing

As for pricing homes correctly - absolutely. I had 3 listing appointments this past week where I think I truly shocked home owners. One thought their home was worth 700K when the sold data said 500K. They need to realize that the price that leaves my mouth is the highest price that the home will likely sell for. It hurts to say it, but it needs to be said.

We're closing on a single fam home (one of my beloved 1967 Orrin Thompson beauties) in Apple Valley. When we priced it correctly, we had 7 offers in 2 days.

I'm not a very good salesman (sorry to my current clients who use this forum!!!) I'm more of an economist when it comes to the housing market. The price of a share of stock can be $100 per share in the morning and $80 per share in the evening. In the evening, I simply cannot convince a potential buyer to pay $100 for my $80 stock. The same is true in housing. I cannot convince someone to pay $300,000 for a home worth $250,000.

OK - I've gotta get back to work. Good evening all!

Robert

[Robert P Stewart]

Oh, and a quick response to catluvr - excellent post - and a very astute observation.

Yes, lending has become more difficult. 660 is the new 620. The lending rules change starting Aug 1st, so it will become even more difficult.

The answer? Have your Realtor work CLOSELY with an EXCELLENT loan officer. Financing is a tool - and other agents need to start realizing that.

Example: Jimmy and Jenny want to buy a cute little bargain of a home with more fungus that a piece of Maytag blue cheese and no appliances (liberated by the previous owner). In their case, they cannot take out a conventional loan for the home AND the money to fix it. If their Realtor understood the tools of financing, he/she would likely recommend an FHA 203K loan. It allows up to $35,000 for improvements to the property. Using that program, the transaction can be assembled.

All of my properties are advertised with specific financing packages for specific types of buyers - it would be ludicrous to do otherwise.

Signed,

Sleepy Robert

[TimtheGuy]

Originally Posted by catluvr

Here's the deal...We sold our house for 200K. Valued and appraised at 229K. Starter home, 3bdr, 1ba. We spent about 3 hours figuring out that a family in a starter home cannot pay 1600.00 monthly. Banks are not giving loans to people for starter homes. You have to have a lot of cash down and/or owned something previously or be rich to get a loan. Blame the banks. Starter homes are not selling, so midsize homes are not being bought which leads to larger homes not being built either.

Minnesotans need to wake up and realize their homes are way overpriced. The only way we are going to have a resurgence in this R.E. economy, is to come back down to earth with pricing. We calculated that if a young family had a life savings for a house of about 6000., the bank will loan about 193K based on a bunch of calculations. When we realized this, we immediately lowered our price because we speculated that people were interested, but couldn't get financed. As soon as we put it at 200K, we had 2 bids. One bid came in just where we wanted it to be. They were greatful we lowered it becasue they could not get financed at 214K where we had it previously. 200K was the magic bullet that put them in our house. New appliances, snowblower, washer/dryer, WH, Furnace, etc. BTW: house passed 3 inspections (private, state and county). It went as a hud home with first time buyer financing incentive. You need to target your market and price it accordingly.

What a steal by our standards, but priced right for this market. .33 acres in Eagan. Wow. There are now 2 happy couples, opposite ends of the US

If everyone figures what people will really pay for their home, I think the market will move again, especially the starter home market.

Blame the banks??????????

While I agree that many currently listed homes are overpriced for the market, I have to disagree with your mortgage loan analysis.

While money saved is one of many factors in a loan approval, we mortgage lenders can lend 100% with seller paid closing costs to most 1st time homebuyers. That is, these borrowers can literally get into a new home for under $500 out of pocket. FACT: with decent income(s) and decent credit scores...these buyers don't need any money except for the earnest money which we can refund at closing. When we couple these 100% loans with city, county and state wide bond programs the buyers can also get a below market interest rate and sometimes grant money to boot.

You were also right about the monthly payment as "$1,600/mo." can disqualify some of the prospective buyers due to debt to income ratios. So, while cash on hand is a factor, approval is more weighted on DTI and credit score. Credit scores on these programs are not very restrictive either. We like to see 660+ and would generally require at least a 620, so very middle of the road.

Mortgage lenders ARE giving lots of loans to starter home buyers. The problem is that so many of these people all ready bought during 'the boom' that there just aren't that many out there at the moment. Couple that with the fact that they all know it is a buyers market...they want a great deal and they shop until they get it.

[Scotchiro]

A buyers market is Good for us. I will admit that we will wait until we get what we want. I am having a difficult time preparing to spend 500K on a home in the Chaska area. I think we can squeeze some people to come down on the asking price. I do not want to sound like a predator though, but realistic. I remember, when not too long ago, a 500K home was "big stuff". Down in Austin, TX, where we are moving from, 500K IS a big nice home. Although there are more expensive. I would say most middle income families can get nice homes for 200-250 and maybe a little more than that depending on size. So, at any rate, this will be a shock but willing to wait.

[SlyFrog]

Originally Posted by Scotchiro

I do not want to sound like a predator though, but realistic. I remember, when not too long ago, a 500K home was "big stuff". . . .So, at any rate, this will be a shock but willing to wait.

Yes. I think this is why there is still a lot of room to fall in the housing market.

$500k+ is still "big stuff." Or at least it should be. Wages in the U.S. simply have not moved that much. A $600k house with 10% down (which may be more common than 20% these days) is around a $4,000+ per month commitment with insurance and taxes. That's pretty much the entire income of a family making around $70k per year, yet that $500-600k asking price seems to be fairly common these days.

Something has to give.

[whatever]

Lotsa good input here. We sold our house in SoFla in <60 days, IMO by pricing correctly. Our RE agent was asleep at the wheel though, she was VERY hard for buyers to get in touch with so I suggest that sellers check up on that to see how easy it is for buyers to do that. Luckily our buyer REALLY liked the place and tried extra hard. He even waited for us to be home to try to get info.

We're closing on a 1920 property up here on some land (one that hasn't already been homogenized) and are sinking some money into it to make it like we want it. I'm thankful that places like that still exist.

[jfog55372]

Hello Yellowsnow,

You have a beautiful home. Is it on a lake or river?

[yellowsnow]

Originally Posted by jfog55372

Hello Yellowsnow,

You have a beautiful home. Is it on a lake or river?

It's on the Mississippi.

[jfog55372]

Is the fact that it is on the Mississippi have a bearing on the sale? Like is it in a flood zone?