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Buying in a sellers market

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A few random thoughts about options and potential problem when making an offer in a sellers market.

Cash. Cash offers without a doubt gives the buyer an advantage. In Ocala though cash offers are not that unusual. We see them often. Cash with no contingency other than an inspection can’t be beat.

Contingencies. Contingencies are a disadvantage. An offer with a contingency on the sale of an existing home is the worst. Even before the current sellers market list agents and sellers were nervous about the sale of a buyers home. Finance contingency will lose out to cash every time. A loan with a local lender is usually look on as better than a big national bank.

Inspections. I put this in it’s own category instead of as a contingency. I have heard of buyers in super competitive situations skipping an inspection and I think that is just crazy. Maybe and just maybe if a house was a year or 2 old but even then I think an inspection should be done.

AS IS. An AS IS contract means that you do an inspection but the seller makes no repairs. The buyer can take it or walk away. Some list agents don’t like AS IS because unlike the traditional contract that locks the buyer in unless the repair limit is exceeded, in an AS IS the buyer can walk away during the inspection period. If a seller is open to AS IS it can be an advantage for the buyer.

Sight Unseen. By that I mean making an offer based on what you see online without actually visiting the house. I’m not a fan and don’t think I would buy a house like this but some people do. I have sold 6 or 7 sight unseen homes. I do a walk through looking for things that you can’t see on MLS images. I have also done short video walk throughs to get a feel for the property. I only do walk throughs and videos for buyers who are drop dead serious about making an offer on a specific home.

Renting. There are few to none short term rentals here in Ocala other than an Air B&B. Ocala 55+ communities have various restrictions against renting short term. Renting long term is hard to find and during the lease term home prices will go up and you’ll be spending $1500 to $2000 a month during the lease. I’ve been told there are short term rentals down in the Villages but that’s all I know. I don’t do rentals at all.

Sellers Market vs Buyers Market

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My real estate career has come full circle. I got my license in 2006 during a crazy real estate boom. In 2008 the bubble burst. I survived the next few years selling cheap homes for low commissions. Finally things picked up and prices went up and things were good. Now here in Ocala we are in a serious sellers market. By that I mean low inventory and homes selling in a few days in some cases.

I wrote this in May of 2009 and it holds true today. Sell high and buy high or Sell low and buy low

Is now the time to buy a house in Ocala FL ?

Think of it this way.

In a sellers market you sell high and generally in a short time. BUT then what do you do? Unless you’re headed to the nursing home or planning a backpacking trip to Tibet you’ll probably have to buy another house. You go out into a sellers market with few choices and pay top dollar for your next house.

Now in a buyers market you may sell lower than you’d like and maybe a lot lower. But you can go out into a buyers market full of inventory and pay an equally low price. That’s why I think a buyers market is actually better than a sellers market………….

The real estate crash in 2008 was not at all the same as today. In 08 a lot of people were buying homes with no down payment and poor credit. In Ocala people were actually speculating by putting money down on a new house and planning to flip it in 6 months after it was completed. There is none of that now.

Today is more supply and demand. A lot of people are leaving northern states and even South Florida because Ocala still has reasonable home prices when compared to other areas. Actually compared to my home town in Massachusetts prices in Ocala are cheap.

 

And yet another bank screws up a sale

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This is a follow up to my previous blog post Not all banks are the same.

My buyers selected at large national bank where they already had an account. We wrote a contract with a 45 day close. In Florida we pick a closing date at the time of the offer and that is the date we are supposed to close unless the sellers and buyers agree in writing to change that date. The loan officer assured my buyers right up to a couple of days before closing they would close on time. It’s important to know that the loan officer usually has little authority over the closer and underwriters. The people in the back room who in the case of big banks are in different cities started asking for more documents. For the 3rd time they asked the buyers for proof of funds they needed for closing in addition to their loan. Those funds were in a different bank. The buyers gave them proof but it took a week for it to go through the bureaucracy. We were now past the closing date. The sellers were furious. Did the bank do anything to expedite things ? No the buyers had an existing home they owned and gave that address to mail the home insurance bill to for their new Ocala house. The underwriters made them change that address with their insurance company. You might think something like that could be done in hours but no it takes days for the bank to respond. Then the bank wanted to see the insurance policy on their other home, a home they had no mortgage on. You might think it is none of the banks business what you do with another home you own but at this point the buyers were at their mercy. The point of this post is that big banks have no mercy. No compassion. They don’t think a state real estate contract terms apply to them. The buyers eventually closed almost 2 weeks after the agreed on date. Both the buyers and sellers were under a lot of stress. The sellers had moved out before the original closing date and needed their money.

Think long and hard before you pick a lender. Interest rates and fees are not the only thing to consider. A local lender is almost always a better choice than a national lender. You can go with any lender you want but ask them if they have a guarantee to close on time, not a promise.

Is it a good time to buy a home in Ocala ?

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Prices have gone up a lot since the great real estate crash of 2008 but there is no bubble like back then. There is not an over supply of homes. In fact there is an under supply and we are in a sellers market. There are not enough new homes being built. We need more builders to step up and start new major projects. Right now builders outside of 55+ are just buying lots in established subdivisions instead of breaking ground on new communities. On Top of the World is planning a huge new community that will be both 55+ and Not 55+ later this year. Another reason there is no bubble is that we don’t have the crazy types of loans that are almost guaranteed to fail like we did back in the great recession. Even though prices have gone up Ocala is still lower priced than most of Florida and a lot less than the rest of the country. A bonus is that it never snows here !

Zillow accuracy in the Ocala area

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I was taking a Realtor class, getting credits for my next license renewal. The subject was about tech for Realtors. To be honest I didn’t expect much and I went because I had nothing else to do that day. Much to my surprise I picked up several good tips. One of the most interesting things was that Zillow rates it’s own accuracy. And I mean they rate themselves right down to the county level.

Zillow is a site that buyers and sellers seem to love and Realtors see as inaccurate. Who is right ? The following is accuracy results that Zillow publishes about it’s own Zestimates.

In Ocala and Marion County as of July 25 2018 for a 3 month period ending July 30

Zillow gives itself 2 out of 4 stars

50% of it’s Zestimates were within 5% of the sold price

70.5% of  Zestimates were within 10% of the sold price

83.5% of Zestimates were within 20% of the sold price

Median error is 5% of the sold price

Those are pretty big numbers to be off. 5% is a $10,000 error on a $200K home. I will give Zillow credit. If you read about Zestimates they say that they are only a starting point and are not the same as a Comparable Market Analysis or an Appraisal. Websites are no substitute for a local expert.

The Listing Portal is a Custom Ocala MLS Search

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A Listing Portal is a custom search on the Ocala/Marion County MLS that creates an account with an ID and password. A buyer will use my Dream Home Finder to provide the information that I need to set up a search. I sometimes use the Dream Home Finder AS IS and I sometimes need to email the buyer to clarify some issue or to make a recommendation. Once the search is set buyers will get an automatic email when ever a new home, that conforms to their search criteria, gets listed. After setting up the Listing Cart I don’t contact my buyers unless they contact me for more info, want to change their search or are ready to see a home. I once had a Listing Cart set up for a buyer from Chicago and it took him 3 years to close down his business and sell his house. I’m very patient.

I can’t help buyers who don’t give me enough information. Too many people will use my Dream Home Finder and just fill in Single Family and a price range. A search like that will get 1,000 hits, no kidding. I need to your your price range. The sq ft of living area, not including the garage or Lanai. The type of home, single family, 55+, pool home ect. There is also a comment section. This is where you tell me that you want to only want a 55+ community with lower HOA fees. Don’t say low fees give me a number.

Below is a screen shot showing what the Listing Portal looks like. On the top there are 5 Tabs. The first is the List View. Next is the Detail View which shows the home size, age, current taxes, HOA fees everything about the home. Photos are next and there can be as many as 50. Drone shots are becoming popular. The Map tab not only shows the location but there is also a Satellite view that zooms in and out. You can email your listing to someone and you can add other email accounts by contacting me. You can rate a listing and make a comment or a note. You can print a listing. There will be some homes that you just don’t like so there is a delete button. The Portal is a direct link to the Ocala MLS. Everything is up to date. All listing on Realtor.com Zillow or where ever originate here.

Listing Portal

Closing costs on new homes vs resales

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In Marion County the seller traditionally pays for title insurance and a tile company handles the closing. The seller pays Documentary Stamps a Florida tax on the sale of a home that is .007 % of the sale price. Unlike resales new home builders don’t pay either for title insurance or Doc Stamps. On a $200,000- home Title Ins. and Doc Stamps would ad up to $2700- +/-.

Some builders offer incentives, a fee at closing to the buyers. These vary by the builder and depend on how sales are doing. You might see them on a Spec home that has been there a while, a model that isn’t the most popular or a home on a less desirable lot. Incentives can offset closing costs.

Buying an Ocala retirement home for cash

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Most of my buyers are looking for a retirement home and quite a few use money from the sale of an existing home in a more expensive part of the country to buy a home for cash here in Ocala. A lot of people don’t like the idea of not having a mortgage hanging over their heads in their retirement years. What some buyers don’t realize is that there are very few closing costs associated with a cash sale.

All of the big money for closing costs come from getting a loan. It is up to the bank to estimate closing costs associated with their loans. From what I have seen closing costs run between $5-$7K on most loans. The funny thing is closing costs can be crazy high on small loans. I saw a buyer get a $50K loan to suppliment cash he had and the closing costs were 5,000 ! I said that’s 10% !

Title and closing. The seller here pays for title insurance and doc stamps (tax on sale). A title company researches the title and delivers a full warranty deed. The title company handles everything to do with the closing.

HOA fees are pro rated to the day of closing. Some HOA’s have a set up fee and a couple have an HOA contribution fee. Some HOA’s want a month or 2 in advance to get started.

Inspections. Everyone needs a professional home inspection which includes a termite inspection. Many get a wind mitigation certificate for their insurance company which lowers the rate a little. An inspection will run in the $350 +/- range depending on what you inspect.

Survey. Being cash there is no bank that requires a survey. 55+ communities are planned communities. However is you don’t get a survey there will be an exclusion on your title insurance saying that you didn’t provide a survey. Most buyers get a survey but not all do. A survey even on a small lot like in 55+ will be $300 +/-.

 

A good reason to buy a 55+ resale is the lot

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After seeing homes in 55+ retirement communities buyers realize that even though the homes may be on smaller lots close together a private view out the back from the Lanai makes all the difference. Private lots sell for a big premium new and are hard to find. There are resale homes with private lots some with a really nice view in many price ranges.

Multiple offers on Ocala area homes

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I was just involved in a multiple offer situation. I don’t see them all the time but this was the 2nd one this year. Both were on 55+ homes which are my specialty. Both also had borderline over the top renovations.

A few things to know about multiple offers. The seller does not have to accept the first offer they get. The sellers can do what ever is in their best interests. Sellers don’t have to disclose that they have other offers. Sellers sometimes will ask for a buyers “highest and best” offer but do not have to. A seller doesn’t have to accept the highest offer. They may for example take a cash offer with no contingency other than an inspection over a higher offer with financing.

In order to win in a multiple offer situation it helps to pay cash and make as AS IS offer asking for no repairs. Offers with financing or even cash contingent on the sale of your existing home with lose out most every time to the cash AS IS offer.