6 Reasons Why Homebuyers Are Sitting on the Fence
The fence is not a comfortable place. It’s not designed for sitting. Yet, many buyers in today’s real estate market are doing just that. Buyers are not ready to make an offer or they have made an offer and cannot successfully negotiate an acceptable contract with the seller.
1) The Media
The media focus is politically charged as we approach the November elections. The media focus has been on the fact that the economy has rebounded yet. The television news, interviews, political ads and commentary are confusing for buyers. The fact is that today’s economic conditions are offering buyers interest rates around 4% for a 30 year fixed rate mortgage. That buying power is huge for today’s homebuyers.
2) Waiting for the Market to Hit Bottom
Talk about a double-dip recession has scared some homebuyers that they might purchase a home today and it will go down in value. Real estate is local so having information on the local market will give buyers the information they need to know. If buyers wait for major media to tell them that the US housing market is rebounding, they will miss the bottom by 6 months. Housing market data is usually reported by quarter and the release of that information takes a few weeks after the quarter has ended.
3) Waiting for a Good Deal
“Deal” is a nasty 4-letter word. But homebuyers think in a buyer’s market they are supposed to get a good deal. Is a good deal getting the lowest price per square foot in the neighborhood? Or is it getting a 5 year old house with new stainless steel appliances, custom blinds and window treatments and a fenced backyard at $20,000 below what the seller has put into the house? Buyers generally do not want to do any work to the house so a good deal to buyers right now is move-in condition and upgrades. Buyers want granite countertops, hardwood floors and no wallpaper or custom paint. Buyers tell me they want be able to move in, make their mortgage payment and live their lives without having any huge projects or expenses ahead of them. They have to go to work to pay for the mortgage and that takes up plenty of their time.
4) Fear of Losing Their Job
Buyers are out there looking at homes and they have talked to a mortgage bank so they are pre-qualified and know what their mortgage payment will be if they buy your home. But some folks are going to work everyday fearful that their job will be eliminated or that their group will get transferred to another state. For some this fear is subconscious so they look at houses but can’t seem to find the right home. I have had prospective buyers tell me they had a dream they lose their job 2 weeks before closing. That anxiety affects them and it affects their expectations when they search for a home. The sellers agent gets the feedback “The buyers like the home but are going to continue looking.”
5) Mortgage Issues
Buyers get pre-qualified but some have heard horror stories of people getting turned down for their mortgage at the last minute. Buyers are taking longer to buy because they will start looking while they are saving for their down payment. They go to open houses and get a jump start on finding their dream home. Some buyers are eager to buy a home but they need to increase their credit score before they can get the lowest interest rate and down payment available. I have clients who want to buy but they have started their own business and have to wait to have 2 years tax returns before the bank will loan them money to buy a home, despite a 20% down payment and an 820 credit score.
6) Have a Home to Sell
Many buyers are also sellers. They are on the fence because someone else is on the fence about their home. They want to move to a different neighborhood, get closer to work or downsize since their kids are starting college. These buyers are begrudgingly on the fence, lowering their price to attract a buyer. Most of these buyers are limited by what they need to make on their home in order to buy the next home.
Homebuyers will regret waiting. When local real estate markets pop (and some already have), it happens quickly and the chances to have your choice of low-priced homes in good condition dwindles. 5 years from now 2010 buyers will be able to say, “I got a great deal in 2010 and my mortgage is only 4%. I can’t believe more people didn’t buy back then.”