A recent story in the REALTOR® Magazine Daily Updates feed that I get everyday carried the headline – Sellers Have Nowhere to Go After the Sale. The story just confirmed the Catch-22 that I’ve been relating to my clients for some time. Do you remember what the catch was in Catch-22? In order to get out on a Section-8 discharge yo had to be declared to be insane; however, if you asked to be declared insane you were obviously sane enough to understand what you were doing and thus didn’t qualify. You were stuck in the Army.
The rapidly rising home prices, combined with low inventory and rising mortgage rates have combined to create one of those no-win situations that Joseph Heller would have loved to write about.
People who want to sell, either to move up or down, depending upon their life situation; are stuck in their homes. They feel stuck because they fear that they will not be able to find a place that they can afford or certainly not quick enough, if their house sells quickly. This soon starts to feed on itself and inventory falls even further, causing prices to rise even more rapidly. So these sellers do nothing and the longer they do nothing the worse it gets.
The creative solution that would-be sellers and their agents are using in many places is a variation on an old contingency play. In times past, buyers might make offers on home that were contingent upon then being able to sell their current home. Now, sellers are turning those tables and asking buyers to allow them to stay in the home, delaying the closing or using post-closing occupancy, until such time as they can find and close on a new home themselves. There's quite a bit of irony in that because sellers were always steered away from contingency sale in the past. Now they are the ones asking for a contingency on the sale. Obviously, such agreements have to have some reasonable timetable attached; but, more and more buyers are agreeing to such terms because it had already taken them so long to find the new house that they want.
I advise any would-be seller to have a contingency plan in place and a place in mid to move to temporarily, if they cannot find a new place before the closing of the sale of their home. It’s a hassle to have to put your stuff in storage and move to an apartment on a short term rental basis; but, that is many times preferable to losing a sale at a good price. Perhaps you can live short term with relatives, even with your kids (which would be a bit of irony, wouldn’t it).
National pundits are now pointing out to 2016 before they see the market returning to a more balanced state – a state in which there is reasonable inventory and a balance between buyers and sellers. Both prices and mortgage rates are predicted to continue to rise during that time as the market readjusts both to reflect the post-recession economy.
So, what should you do if you want or need to buy or sell? First, don’t abandon hope and give up. As a potential Seller, this is you market; take advantage of it to sell now - faster and for top dollar. Just have a plan in place. Don’t be afraid to ask for that extra time from the buyer. Have a contingency plan for temporary living.
As a buyer, you may have to look harder and longer to find what you want. It is just harder, not impossible. You may have to compromise some of your criteria a bit. You may have to pay a bit more than you initially planned, but the market is appreciating so fast right now that you’ll make that back in equity fairly fast. You must be ready to move when you see a house that you want (pre-approvals all in place) and you will need to be aggressive with your bid (you likely will have to bid more than asking). This is not a market for the timid or the overly-analytic buyer; but, it is also not an impossible market, just a tougher one.
The Catch-22 in this market is trying to force inaction and the way out is to take action.
