Nearly everyone is aware by now that the recent recession and financial crisis began in the real estate and banking sectors. As a result, these businesses have been greatly altered and more heavily regulated by both state and federal agencies. The process of financing a real estate purchase has changed compared to ten years ago. Technology and internet business has continued to evolve and change the way real estate brokers do business, too.
So, if you plan on selling a home this year, or if you plan on buying a new home — or both — here is a brief overview of the changes in the industry from what you may have experienced in the past, or what you have heard from others:
1. There are fewer Realtors in business. The massive influx of new, inexperienced agents chasing “easy money” that took place during the boom has reversed. The number of real estate agents currently in the business is down significantly from the peak. In most cases, the most experienced people have survived because they had developed skills for assisting buyers and sellers in all kinds of economic conditions. This shrinking of the professional work force has also meant that many of the large real estate brokerages have closed some of their offices, and in their place a different broker may have opened a branch office, or a new ‘mom-and-pop’ company may have started up. For a buyer, its still the skill of the individual agent that has the biggest impact on your transaction, but if you are looking to sell a home, the size and reach of the broker you choose may have an impact on how broad an audience your listing will reach.
2. Expenses have increased. Inflation has not gone away, so while prices were going down on homes, everything else was getting more expensive. Flat-fee commissions have gone up, the price of signs, ads, etc. has increased, as have the expenses of just running a business. The seller still provides the cash that makes the transaction work, from paying agent commissions to the growing need for subsidies to buyers to pay closing costs.
3. The market has stabilized. 2012 will go down as the year that most marketplaces began to grow again. Inventory of unsold homes has been absorbed and many buyers are out there waiting for the right home to be listed. However, that doesn’t mean that prices will start to zoom upward. The equity that sellers had in 2004 has shrunk significantly, so be sure to have a reasonable expectation for your bottom line. Buyers need to realize that homes in good condition that are priced well may actually sell at list price. Trying to drive a “hard bargain” may get you a firm “no, thanks.”
4. Technology has continued to put more information in the public’s hands. Whether buying or selling, today’s consumer has unprecedented access to listing information, community information, and tax information, which means that the average buyer does a great deal more research on their own than ever before. However, some of that information is outdated, wrong, or even intentionally fraudulent. They are contacting a Realtor later in the process than ever before and not getting the quality consumer education they did in years past.
5. Loan originators are more heavily regulated. While there were definite abuses during the boom years, the pendulum may have swung too far to the other extreme at this point in the recovery. Mortgage lenders are pickier and require more documentation than ever before. More loan programs are requiring time-consuming mortgage counseling. Bottom line: expect more paperwork, multiple requests for updated versions of the same documentation you provided last month, and the deals that used to close in four weeks now will almost certainly need six.
6. Appraisers are more isolated from the transaction. Some of the new regulation involves separating appraisers from lenders and agents who might apply pressure to have the property valued at a certain level, if for no other reason than to help the sale close. More properties are not appraising at the contract price, and its harder to appeal a value that does not meet the sale price.
The housing market is healing, but its a work in progress. Prices overall are still the most reasonable they have been in years, and mortgage interest rates are still at historic lows. If you are considering a real estate transaction, contact a professional and let us help you avoid the pitfalls of the new marketplace.