Homes: Getting the Deal of a Life Time or a Piece of the Pie

Written by Amanda Boehm-Garcia   // May 16, 2011   // 0 Comments

By Jordan Sawatzky

Is it conceivable for your average white collar Dollar Shark to purchase a home? Is there still money to be made off of a home sale?

I see numerous articles that say we are going through the next big dip in the housing market. It sure is hard to see that happening in the bay area.  Zillow suggests that the median price of a home in San Francisco, CA is $699,000 (and frankly, that’s a bargain) and California overall has a median price of a home valued at $312,200. Either way, this hurts my pocketbook and probably drops my credit score even just to look at the price. Compare California with the staggeringly less expensive neighbor Oregon (median price at $180,800), and it makes my eyes wander to those greener pastures of affordability. So I know what is palatable for me to afford.

I think I can safely say that many Americans have learned not to get roped into a mortgage since they may end up like their brethren that are forced to pay for the over-priced value of a house in yesteryear dollar scales. Oh almighty housing industry, how can I benefit from your cheaply goodness and not get screwed by another housing value dip later down the road?

I also have to keep in mind that waiting for cheaper houses to get on the market doesn’t ensure I will also still get an awesome mortgage rate. So a cheap house with a high mortgage rate defeats the purpose of bargain shopping. And the competition is fierce amongst buyers, as discussed in a recent article by the Wall Street Journal about the home buyers market. Buyers are outbidding each other and paying for homes in cash and this can drastically reduce available inventory for people relying on government-backed mortgages.

We have the viewpoint of the buyer a la Dollar Shark. What about the seller’s perspective? How do they still make a profit when there is a hyper-awareness of the true value of a home?

I’m interested in the actual homeowner’s (or increasingly common – the bank) cut they take of the sale. And how do you sell in a market that isn’t for a rock bottom price or where one hopes just break even? At some point, sellers with equity in their homes have started to put their foot down and stop the bleeding, in terms of their profit margin (and Dollar Shark smells the blood, for sure). The competition for Sellers has included a slew of foreclosed homes that continue to flood the market. Banks have also had a stranglehold on approving loans, thus halting sales on homes with higher prices further.

Instead of bowing to the price of a foreclosed home or be subjected to tight-fisted banks, most sellers are sitting on their property, and for 6+ months in some cases. Sure, you can try to undercut the competition further in prices, or have a professional stager come in to home upgrade the décor, or advertise online. But at what cost to the poor homeowner that’s trying to make something back on the sale of their property?  The average home seller makes their first price reduction of 8% of the total price within 90 days of being on the market. And you make have to wait a minimum of 5 months to close a deal.

So the short of it, if you don’t mind waiting and investing in the presentation of your property, then chances are you’ll make a little money. How much money? This is a question that has to remain open for the time being. However, if you have to sell now, those chances of your piece of the pie decrease quite a bit.

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