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Bargaining Power: Who Has More, Buyers or Sellers?

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Can you spell r-h-e-t-o-r-i-c-a-l? With an overabundance of housing inventory, sellers in distress, and credit as tight a drum, anyone who has been looking to sell or purchase knows the current state of the U.S. housing markets. It  heavily favors the buyers.

For more than a year now what was once a boom and boon for builders and sellers is now in the court of the buyers. Knowing the climate that is prevalent from coast to coast, with few exceptions, buyers now calculating and unmoving in their negotiations while seeking the best deal for the best house that they can find. Not only are realtors and private sellers suffering, but the builders have also taken a major hit during the current depression in sales and the overload of available properties, many of which are sales of desperation or foreclosures at auction.

In May of 2010 the construction of new homes dropped a staggering seventeen percent from the previous month. These statistics compiled by the Commerce department point to the fact the forecasts for that period were considerably lower than had been predicted, and permits for new development and construction dropped ten percent as well.

Despite the lowest mortgage loan rates in over twenty years sellers are feeling the crunch because buyers tend to be cash poor, many are unemployed and most are apprehensive. So it is no wonder that those in the know, and who have the means, are now making unprecedented deals that favor the buyer. It only makes sense when loan applications are falling to levels not experienced since the mid-nineties.

None of this should startle anyone or cause them to question what is happening. It is the most basic economic law of supply and demand turning itself up-side-down and favoring those who were previously competing for a commodity that is now overstocked.

All the listing services, tracking data and intel collected by the financial industry indicate that it’s a buyer’s market and may very well be for a while. Owing to the fact that there are more properties than qualified buyers, complicated by a deluge of foreclosed homes being put on the auction block at what are at times well below market prices, new homes and good properties are taking much longer to be sold and an atypical market exists.

Current data and projections are pointing towards 2011 as being the worst drop in home prices experienced in memory. Kings County, California, which will be sited here as an example, see prices plummeting an estimated twenty-nine percent in 2011.

Two factors that are influencing the availability of homes and sluggish sales are the lack of purchasing viability due to job lay-offs, unemployment, and regions that annually suffer a down-turn in sales during certain seasons. Those who fear unemployment are known to be selling their properties before a worse crisis is upon them to avoid foreclosure because they no longer have the income to make the payments. In such circumstances, although a distinct hardship, this is a prudent move on their part which will help protect their credit rating and future purchasing power by not defaulting on their current loan.

The second factor relates to areas where slower sales are occurring in the winter. So, if a seller is pushed into selling during a slow period the price they get will not be up to the same level as when home sales are more spirited as occurs in the spring just in time for the summer months when people have vacation time and are able to commit more time to moving in and getting settled with their families.

When sellers start to feel the pinch from a slower market they instinctively try to create incentives for the buyers. Some sellers offer financing that may be cheaper than the lending institutions are offering at the time, some even go so far as to taking on small repairs and renovations, and at times furnishings and appliances. Some sellers become so desperate that after making concessions to forward a sale they end up simply getting out from under their burden and they realize little or no profit for their efforts and investment.

In one area of Washington State where housing prices declined 4.8 percent in 2010 sales are now on the rise because buyers understand the conditions are in favor of those who have the cash or credit to purchase now before the markets inevitably improve, and prices start their climb back upwards. One county’s sales figures have indicated that January 2011 sales are up a little over a hundred percent over the same month last year. This increase is most likely due to the median price of homes and condos falling from just over $400,000 in 2010 to $220,000. Despite the sharp dip in prices, sellers are now seeing a slight increase in sales which is not as profitable as they would like, but at least homes are starting to move again and the market is stimulated.

Tax Lien Foreclosures Also Help in Creating a Buyer’s Market

When the foreclosure market started making leaps and bounds four years ago during the national debt crisis some communities became flush with available homes. One community in Iowa had over eighty homes on the block that suited the criteria of just one prospective buyer. This indicates how far the housing market plummeted before starting to ever so slowly rebound. Iowa City prices are forecasted to climb about 3.2 percent in 2011 which indicates a slight trend in the market improving.

The hope for improvement in selling prices is still constrained by the vast number of residential property loans that are now going into default and will eventually foreclose. Another problem plaguing sellers is that they must work harder, be more inventive and spend more to attract buyers to them rather than the competition, buyers who know this are using it to their advantage. These expenses, coupled with the concessions being made in pricing, are cutting into everyone’s ability to see the ROI (return on investment) that they forecasted when they first purchased their home. If all of this was not enough to create a buyer’s market low rates on thirty year fixed mortgages (FMRs) are still available.

The Obvious Conclusion

The American economy began its slip about four years ago and the real estae bubble that was so grossly over-inflated burst diminishing values, lowering prices and flattening the markets. This in turn slowed the building market and all of its peripheral industry and services to also grind to a halt. Rampant unemployment hit the nation from coast to coast and the American dream of homeownership became a living nightmare for so many hardworking Americans who had invested in property as their future. Property, both commercial and residential, became plentiful and cheap. Couple this with the credit crunch that is making lenders unwilling to extend credit, and the pool of potential buyers shrinks to here to unknown levels which in turn is fostering a buyer’s market until things improve. For property investors or home buyers that still have good credit, cash on hand, and solid employment the current market situation in America is a boon to be taken advantage of.

It May Be a Buyer’s Market But These 10 Tips Can Help You Even Further:

  1. Sign up for an opt-in program of property listings.

    You are now online to take advantage of the resources the Internet has to offer. Optimize that concept by signing up for timely up-dates to property listings in your area. So much data is old and obsolete you do not need to frustrate the process, use up valuable time and be drawn into schemes that rely on these “fraudulent” listings to get your attention and misdirect you to the ones the sellers want you to see. Get daily MLS listings that suit your criteria and area.

  2. Ask to see properties that have recently had their selling price reduced.

    Asking for deals on recently listed homes is not always a good approach. Ask your agent, or view on your own, homes that have been on the market a bit longer and may have already had the price reduced. The longer a home has been on the market the easier it is to get your asking price, just be certain the house is not selling because of the existing market conditions and not because there is something inherently wrong with it, or suspect with the seller.

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