Foreclosure. In the new homes market, it’s the “F” word. The number of foreclosure filings in the U.S. rose by 81 percent in 2008 and by a whopping 225 percent from 2006. The housing market is flooded with the tsunami of perceived bargains. The key word here is “perceived.” There are several reasons that the “buyer beware” rule should be in effect when considering a foreclosed property:
1. Poor maintenance. If the owner wasn’t paying the mortgage, what makes you think he/she was investing in even the most basic upkeep?
2. As is. The “As Is” caveat could be costly for the buyer. A new home and its contents have warranties that protect the buyer. When buying a foreclosure, you get exactly what you pay for.
3. The angry owner. In the wake of a foreclosure, many former owners feel victimized by their situation. There are countless tales of homes being stripped of appliances, lighting fixtures, and even plumbing—all of which are removed in haste, and with no concern for the incoming dweller.
4. Hidden cost-cutters. If the foreclosed property is a new home, the builder was likely cutting many corners to avoid mounting more debt. What’s hidden under the drywall? “New” doesn’t necessarily mean a home is in excellent condition; it could mean that no one has yet discovered the creeping shortcuts.
5. Wasted time. Purchasing a foreclosure requires a mountain of paperwork and it can take months before you discover whether the bank accepts the deal. And what happens if your offer fails to make the cut? You begin the lengthy process again.
When your prospective buyer tosses down the “F” word like a gauntlet, pick it up and present the reasons why the foreclosed property is a questionable investment, at best. Then bestow upon them the many reasons that the new home you’re selling will deliver long-term value, satisfaction, comfort, and peace of mind.
I was recently talking with a builder who was incensed by the demands of prospective buyers. “They want me to just throw in a furniture package with the deal,” he sputtered.
I listened and empathized with his plight. I’ve heard this same frustration voiced by many builders, developers, and new homes sellers in this market. Buyers want ridiculous discount and absurd freebies in order to close the deal. They’ve been handed a market where the buyer dictates and they are feeling choked by the heightened demands.
Let’s take a look at the situation though. The leak in the housing market started to trickle in the first quarter of 2007. Now, 25 months later, the sellers are scurrying to plug that gaping hole in a market that is flooded with short sales and foreclosures. The media, real estate agents, and mortgage companies are telling these buyers that now is a great time to buy. Have you ever heard them advise buyers that it’s not a good time?
As a result of the economic crunch, buyers are making offers that would have been swatted away like a pesky bug just two years ago. But these buyers, while they may appear vulture-like in their approach, are not fools. They resisted the top-of-market buying frenzy, sat on the sidelines to gauge the action, and are now quite enlightened about the status quo of the buyer’s market. They’re ready to play the buying game like a battle to the death. What you call “absurd”, these savvy buyers call “realistic.”
My advice to you is to be prepared. Know that these crazy offers will come, and that they arise from hopes but not necessarily expectations. Sharpen your negotiating skills and respond to those offers respectfully—because at least you have an offer to negotiate! Communicate the value of your property and justify the price. Work harder to see where you can cut your margins and where your buyer is willing to bend. A ridiculous offer just means you have to work harder and smarter.
Do you ever wonder how other marketplaces are performing?
Visit www.housingpredictor.com for an up-to-the-minute crystal ball forecast. By the way, the world as a whole really isn’t as bad as the media would lead you to believe. There are marketplaces that are prospering and faring well. Unfortunately, we are all normally fed the bad news. Keep visiting, we are committed to providing you with the good news, and solutions that will help you beat the market like a drum.
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New Home Sales, New Home Sales Management Training, Sales Management | 
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