What's a Buyer to Do in Dallas?

We have issues in Dallas.  Housing supply issues.  Steady economic growth, low interest rates, and rising rents should have sale prices escalating to record levels.  Low housing inventory is driving up prices and making buyer competition fierce, and bringing the number of sales to record lows.  

This morning, both the Wall Street Journal and USA Today reported on "gridlock" in the housing market that's preventing first-time homebuyers and current homeowners who would like to trade up from realizing their housing goals.

Current entry and mid-level home owners are unable to move up due to soaring prices of both mid-tier and luxury homes.  Although it is a great time to sell, many current homeowners simply cannot afford to trade up now.  Families who would be trading up to a larger home in a "normal" market are, instead, digging in their heels and remodeling to extend the appeal of their current homes.  Since those homeowners aren't selling, hopeful buyers have more limited choices than ever for finding modestly priced preowned properties.

Tight inventory presents an opportunity for new home builders, but those builders are having to purchase land far from the city, even into areas where there aren't sufficient neighborhood schools to handle the influx of families.  Prices for new homes aren't all that appealing for first-time buyers, either.

The bottom line for home buyers is that there are homes available for purchase, but the selection is limited and prices aren't going down any time soon.  Buyers need to adjust their housing expectations to more modest levels and understand that list prices are a mere starting point in this market.  Fierce competition from other buyers means that multiple offers and above-list-price offers are the new normal.  

In 2014, the average home price in Dallas was $365,506. In 2015, the average price rose to $388,460.  So, waiting a year to buy a home cost the average buyer $23,000.*

With home prices expected to continue their escalation well into 2017, waiting to save for a higher down payment or in hopes that the market will cool down could cost thousands in home price a year from now.  Rental prices are soaring, too, so buying a home at a fair price now to live in for a few years is a buyer's best strategy, even if it means settling for something that is not a "perfect" dream home for now.

*Source:  NTREIS

Who's Buying What...a Generational Breakdown

Just 17% of buyers under the age of 35 closed on urban residences, down from 21% a year earlier, according to a recent National Association of Realtors® report on generational trends in home buying and selling.

The luster of urban life may be fading—for some, anyway—due to skyscraper-high prices in top markets. Suburbs exerted a strong pull on buyers of all age ranges. About 51% of millennial home buyers scooped up residences in the suburbs or a subdivision compared with 58% of Generation Xers (ages 36 to 50); 51% of baby boomers ages 51 to 60; 53% of boomers ages 61 to 69; and 42% of the Silent Generation (70 and older).

More information here:  http://www.realtor.com/news/real-estate-news/generational-home-buying-trends/?cid=soc_20160311_59182086&adbid=10154068277097871&adbpl=fb&adbpr=35368227870

When A Cash Offer Isn't A Cash Deal.

Dallas has become wild west in terms of housing.  People are moving in from all over and scrambling to find a place to live. In recent months, folks have gone so far as to camp out for an opportunity to purchase a lot to build on, and I frequently experience lines of real estate brokers and their clients waiting in front of listings (even in the rain) for their turn to get a peek inside.

Multiple offers have become the norm. Well-informed buyers, whether they are investors or owner-occupants, know they must make an offer fast, and those offers typically include an expiration date so they can move on to the next property if their offer is rejected.

When a seller sits down to quickly decide which offer to accept, he or she must consider offer deadlines, terms, and contingencies as well as the price.  This is when cash offers move up to the top of the pile.

If an offer to purchase a home includes financing, the transaction is a bit more involved. A mortgage lender will require an appraisal. If the home doesn't appraise for the contract amount, or if the appraiser identifies major repairs needed (think foundation or roof), complications and renegotiations ensue.  Additionally, the mortgage underwriting process typically takes 30 days or longer, and delays beyond that are always a possibility.

With a cash offer, an appraisal isn't necessary. There is no loan, so underwriting is not an issue. The transaction can close quickly and without complication...usually.

Some experienced buyers (often investors in my experience) know that sellers are more likely to accept a cash offer.  Some will use that advantage to submit an offer for cash, assuming that the seller is more likely to accept it because it has fewer contingencies.  But...sometimes, after the buyer and seller execute the contract for a cash sale, the buyer then informs the seller that he/she has decided to finance the purchase.  This is the old Bait and Switch.  It's perfectly legal, but it's frustrating for sellers and for buyers who disclosed up front that they would have financed the purchase.

All of a sudden, that cash offer isn't a cash deal. What's a seller to do?  It might be a week or longer in the sale process when the buyer pulls the Bait and Switch. Does the seller insist the buyer to perform under the original terms of the contract or take the chance that the buyer's lender will be able to close the loan on time?

This is where a good broker's experience, knowledge, and negotiating strength comes in when considering offers.  The purchase contract and third party financing addendum contain specific language about financing. Although we are not attorneys, brokers can suggest specific requirements for option periods/fees, earnest money, and which items to check (or not) on the contract for financing contingencies, etc. to protect our client's best interests. One thing to look for as a clue on a cash offer:  A closing date of 30+ days out.  Cash sales don't need 30+ days to close!

A good broker will also know what key questions to ask the buyer's lender to determine the legitimacy of the buyer's creditworthiness and the underwriting procedures at the lending institution. This information will help the seller make an intelligent decision on whether allowing the switch to financing makes sense.

A broker should advise their sellers to insist that all cash offers be accompanied by Proof of Funds and should verify that information to be accurate before their client executes the offer.  The seller should be prepared to deny a switch to a financed transaction, if it is not in his or her best interest. Just because the buyer asks to change the original terms of the contract doesn't mean the seller has to agree.

 

Home Buyers Are Feeling the Pressure

First-time buyers are typically nervous and excited about purchasing their first home.  They have much to consider for example, such as neighborhoods, schools, taxes, maintenance, HOA fees, insurance, and mortgage payments.  The current shortage of homes at affordable prices adds fuel to that fire, but main concerns hear from clients are the competition from cash investors and multiple offers.

Cash Buyers
Cash rich investors are snapping up properties to flip or rent at staggering rates.   The National Association of REALTORS chief economist, Lawrence Yun, states that "home supply is diminishing, but investor demand is not going away."  I see this increasingly in the $200,000 and under price range in the Dallas area.  Investors will make offers on homes in almost any condition.

According to today's Wall Street Journal, many investors are taking advantage of the demand for rentals, which has "boomed."  Rental vacancies nationally were down to near record lows, and median rent was up 11% over the past year.  

Many investors are buying homes sight unseen. In just the past week, I have personally dealt with three out-of-state investors who are willing to pay cash for properties in just about any condition, with  no desire to see the property before making an offer.  

When a buyer (first time or otherwise) finances a purchase, there are contingencies that could delay or stop closing the transaction, which can include appraisals, lender-required repairs, or delays in the lender underwriting process.  When selling to a cash buyer, sellers have no need to worry about such contingencies.  This is why sellers will typically accept a cash offer over a financed offer, even if the cash offer is slightly lower.  Cash transactions are simply quicker and less stress for sellers.

Multiple Offers
Multiple offers and sale prices above list price are the new norm.  Larger earnest money deposits, shorter option periods, and fewer seller concessions are all typical.  Although everything is negotiable, sellers now frequently outline what minimum earnest money and option fees are expected in the multiple listing service data for their property. 

When a new listing becomes available, there is a mad dash of showings within the first few days.  Brokers and their clients are constantly on the look out for new listings so that they can get there before other buyers.  I've shown homes recently where there was a line of agents and clients three deep to tour homes at 10 am Sunday morning.  Buyers simply have to be available in a moment's notice to access to the newest properties for sale.  It's important to work with a broker who knows what homes are "coming soon" and those that are for sale but not on MLS (known as "hip pockets).

Bottom line?  
Now, more than ever, buyers should use an experienced broker who is available on short notice to view new listings and who knows how  to structure a fair offer while looking out for his/her client's best interests, home buying can still be a pleasurable experience, even for first timers.

Just listed - 9138 Emberglow Lane in Dallas

This spacious 3 bedroom/3 bathroom townhome is located in the serene subdivision of Chimney Hill, just off Greenville Avenue and LBJ.  

Monthly HOA dues include 6 tennis courts, olympic-sized pool, parks, dog areas, clubhouse and more!  

This is currently the most reasonably priced 3 bathroom home within RISD.

Brava Realty Encourages Drivers to Slow Down

Dallas REALTOR  Says “Drive Like  Your Kids Live Here”

Safer Streets Mean Better Home Values

Brava Realty is helping residents in the far north Dallas area of Prestonwood encourage drivers to slow down.

Kristine Baugh, Brava Realty’s owner/broker, is busy delivering dozens of free “Drive Like Your Kids Live Here®” signs to Prestonwood neighbors.  Baugh decided to take action after a recent discussion with neighbors about dangerous conditions caused by drivers speeding down streets and alleys. “It’s important to protect what’s precious to us, and that includes our children and pets,” she said.  “Also, home buyers do evaluate traffic conditions around listings.  Quiet streets are a definite advantage when selling your home.”

Neighbors volunteered to post Drive Like Your Kid Lives Here® signs to stop distracted and reckless driving in Prestonwood.  “One of the many wonderful things about Prestonwood is that we truly care about each other and our neighborhood,” Baugh said.  “It was no surprise that so many neighbors volunteered to place these signs on their lawns.”

“I’ve always felt that being a real estate broker involves more than just listing homes for sale,” Baugh added.  “Brava Realty has always focused on giving back to the community.”  In addition to distributing the free signs, she has also pledged to donate a portion of all sales commissions to Richardson ISD elementary school PTAs during the 2015-16 school year.

Slowing down saves lives. Sadly, in 2013, Texas had the nation’s highest number of child traffic fatalities (128), according to the National Center for Statistics and Analysis.  Bicyclists, joggers, and adult pedestrians are also at risk.  Brava Realty and its Prestonwood neighbors think we can do better.

Brava Realty is an independent, boutique real estate brokerage founded in 2006.

Home Designs Defined

Have you ever wondered what the difference is between Dutch Colonial and French Provincial architectural design?  Here's a link to describe the differences in residential styles!Guide to Residential Styles