Archive for February, 2008

Sellers: looking at contingent offers

Virtually every real estate contract has contingencies that the Buyer must meet or otherwise have an option to withdraw from escrow. The three traditional major contingencies are the ability to get a loan for specified amounts at specified terms, the acceptance of the result of a physical inspection and other due diligence, and a review of documents pertaining to the property, such as a preliminary title report.

But the current market is seeing a new contingency that we haven’t seen much of at all in the past 12 or so years: Buyer’s offer is contingent upon the sale of the Buyer’s property. In the past few years, Sellers would have laughed at such a contingency…why wait for the Buyers to sell their property when you can get another three or four or eight offers without that contingency?

But times have changed. Now, with many properties being on the market for 60, 90, 120 days or more, Sellers may be more willing to consider an offer contingent upon the sale of the Buyer’s property.

There are many factors that a Seller should consider, including length of time the Buyer has to remove this contingency, how attractive the property is and how well priced it is (to gauge the likelihood of reasonably prompt sale), the apparent willingness of the Buyer to do what it takes to get their property sold and assessment of the Buyer’s real estate agent’s ability to successfully market the Buyer’s property.

There isn’t a simple, clean set of answers to these questions. If Sellers have their property listed with me, I will walk them through the questions and answers as I evaluate them, giving them the benefit of my 17 years of experience, including experience gained in the last down market of 1990-1996.

When the market changes as it has over the past few months, Sellers have to change and adapt with it. Carefully considering a contingency of the Buyer’s selling their home may be a prudent thing to do if the offer is otherwise solid and if the prospects of the Buyer doing so look good within a specified period of time.

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February 18, 2008 at 10:28 am 1 comment

Market Conditions for Santa Monica Real Estate, February 2008

The real estate market has softened in Santa Monica over the past six months, prompted by the sub-prime mortgage crisis, which has made securing regular real estate loans more difficult, particularly in the higher price ranges. This softening is now encouraged by broader fears of a recession and the general state of the economy.

But, as before, the reality in Santa Monica is better than the national, state, or even regional headlines might lead a reader to believe. Prices are edging downward, not plummeting as they are in other parts of the state.

Since the first of February, there have been approximately 45 new listings of single-family homes, townhouses, and condos. Meanwhile, there have been approximately 40 price reductions to existing inventory.

As of today, there are 132 condos and townhomes on the market in Santa Monica; 43 have closed escrow since December 1. (Data obtained from the MLS.)

For single-family homes, 80 are on the market right now, with 34 having closed escrow since December 1.

While 132 condos and 80 single-family homes may seem like a lot—and it is a lot compared to what was on the market for the years 2002-2005—the numbers represent only a little more than a six month inventory of condos & townhouses and less than five months inventory of single-family homes. A six-month inventory is the standard by which a normal market is measured.

Implications of these numbers for Sellers and Buyers: for Sellers, now is not the time to get overly ambitious with your asking price. Do you want to list your home or sell it? The current market gives clear indications that you can sell and do so at a reasonable price.

For Buyers, you can get a good deal compared to a year ago or even six months ago. But I sincerely doubt that we’re going to see prices go 20 percent or more below current levels. If you say that you want to pay what prices are going to be in six months, then you need to wait those six months and see what those prices are…and those prices may not be dramatically different from what they are today.

I’ve been following several market niches intensely for various clients, including townhomes in Santa Monica and single-family homes in Westwood. If you have a question about how a particular market niche is doing, then either ask here or drop me an e-mail at jimbrunet@santamonicahomes.net or give me a call at (310) 508-6878.

February 16, 2008 at 5:10 pm Leave a comment


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