Market Cliff Notes…

Much has been said and written lately about the changes taking place in our local real estate market. For the data junkies among us, here is a good article from the Seattle Times with all the stats. For those of you with less time on your hands, here are my Cliff Notes on the current state of affairs.

• Single family home prices both in Seattle and on the Eastside have dipped a bit since hitting their peak in May. Depending on your exact neighborhood, prices are probably down about 5%.
• More importantly, through September, prices across the region are still up vs. a year ago. Again, depending on your location the Eastside is up approximately 4% and Seattle is up about 7%. All in, I don’t think this summer’s lull represents a fundamental change in the upward trajectory of our market.
• We are still in a seller’s market, but the balance of power has shifted in the direction of buyers in recent months. Inventory is increasing not due to an influx of new listings, but because homes are sitting on the market longer.

The upshot of these market adjustments is that it feels a lot more like a “normal” market out there than it has in a long time. Buyers are taking their time and being more discerning and sellers are having to adjust to a new reality. Here are a few examples of how things have changed.

In many cases buyers can now actually negotiate the purchase price of a home! Offer review dates, which were a fixture during the over-heated market of the past few years, are largely a thing of the past. Bidding wars are much less frequent and fewer houses are selling for more than their listing prices. Buyers can go take a second look at a house before making an offer, and then offer less than the asking price. I’m not making this stuff up!

Buyers are also including critical contingencies in their offers. In the go-go market of the past few years buyers were forced to take on undue risk by waiving contingencies in order to present “clean” offers and win bidding wars. This is no longer the case.

All of my recent transactions, representing both buyers and sellers, have included inspection contingencies. These give buyers the peace of mind of being able to renegotiate or get out of a deal without penalty if the inspection turns up something they don’t like. Sellers have to adjust their expectations and remind themselves that this, and not the wild ride of the past few years, is the normal course of business.

Financing contingencies, which were taboo during the recent binge, are also back in play. Not everyone has the money sitting in a Swiss bank account to pay cash for a house, and in today’s market qualified buyers can finance their purchases without waiving their rights or doing other painful financial contortions in order to make a deal. Good lenders have also become more creative and lots of deals are coming together that include a variety of clever financing options. Sellers should rely on their listing agents to differentiate between high-risk and low/no-risk financing (and buyers) in the offers they are evaluating. As long as you can be sure that the money shows up at closing it really doesn’t matter where the buyer is getting it.

Perhaps best of all, in the right situation buyers can once again buy a home contingent on the sale of their current home. We haven’t seen these deals in years and I’ve recently negotiated two of them, one for a buyer and one for a seller. These transactions require a bit of finessing, and like the financing nuances above, a good agent can be very helpful in navigating the process. The fact that contingent sales are back is really a sign of the times!

In general, sellers have to be realistic when pricing their homes. Most buyers know the market and are not likely to pay your asking price just because you asked it. Properly priced and marketed properties are still selling but it’s important to do the research up front so you are acting on solid data. This is not the market for trying “shoot the moon” prices.

Savvy buyers are also less likely in the current environment to overlook imperfections and deferred maintenance. With more homes to look at, buyers will be comparing you to the competition. So finish the projects, do the work that needs to be done, and put yourself in the best possible position to sell your home quickly and for top dollar.

Let me know how I can help.