Articles | February-March 2012

Buying and Selling a New Home

Reducing Stress in the Current Economy

by Kevin Forest Moreau

The first thing to keep in mind? Don’t panic. While the real estate market is in a state of flux, “things seem to be getting better,” says Steve Palm, president of SmartNumbers, which provides statistics, polling information and reporting on residential real estate for brokers, developers and banking professionals. Palm predicts that 2012 will be better than 2011, “and I haven’t said that in a long time,” he says.

Still, the unsteady economy means that less people are looking to purchase new homes, which benefits those who are looking to buy. “If you can afford to buy something right now,” Palm says, “do it.”

Natalie Lee, a Realtor with Prudential Georgia Realty whose client list includes first-time home buyers, corporate executives and others relocating to and from the Atlanta area, agrees. “It’s definitely a great time to buy,” she says, adding: “There’s a lot to choose from, a lot of different opportunities.”

But, she warns, “Flexibility is key. More options are opened up if you have time and can be flexible.”

Short Sales and Foreclosures

That’s because many of those options take the form of short sales and foreclosure sales. Experts say these types of sales can save buyers a lot of money—but be aware that there are some risks involved.

A short sale, Lee explains, “is when a seller is selling the property for less than what they owe on the mortgage.” In this situation, the seller must get the bank that owns the mortgage to agree to take less than what the homeowner currently owes. “For bankers, taking a loss in a short sale can be better than foreclosure and better than bankruptcy,” Lee says. “For buyers, they’re not paying full price in a lot of cases.”

The downside? “Short sales take time,” says Rhonda Duffy, a broker and consumer advocate. “They take 50 days on average to get approval, and another 25 to 30 to close.” In fact, echoes Lee, getting approval from the bank “can take six months or more in some instances.”

Foreclosures, in which the bank or mortgage lender takes a property back from a mortgage holder, usually for lack of payment, come with their own risk, Duffy says. An issue with the title can crop up late in the process, scuttling the deal and forcing the buyer to start over. Sometimes, says Lee, due to a backlog of cases, a bank may list a property as available before the proper paperwork on the foreclosure has been completed.

In addition, these sales come with other pitfalls, especially for those who are relocating to a new city. “Short sales and foreclosures typically don’t have the maintenance history of a regular resell,” says Duffy. In addition to the stress of a new job, meeting new people in a new place, the buyer “doesn’t know any contractors, they don’t know where the nearest Home Depot is, that kind of thing.”

Most of the time, she says, while buyers relocating from somewhere else may initially be attracted to short sales and foreclosures, “they don’t end up buying one. Foreclosures and short sales can be a great deal, but they require a great deal of patience. I just find that for some people who already have uncertainty about where they’re moving, where they’re going to be working, making new friends and so on, they just can’t really tolerate this added uncertainty.”

If you decide to pursue a short sale or foreclosure, “make sure to work with a Realtor that has handled them before and can ask the right questions,” Lee advises. “Is the short sale approved, meaning all the paperwork has been done and the bank is willing? Sometimes a home is marketed as a short sale but the bank hasn’t approved it. Months down the line, the bank says no and you’re out all that time.”

Lease-purchase and lease-option agreements are appealing alternatives to many new arrivals. A lease-purchase allows the buyer to occupy the space and pay rent while he or she pays in installments to buy the property, while a lease-option or rent-to-own arrangement is basically a regular rental agreement with an option to purchase the home at a later date.

These arrangements come with their own potential dangers, Duffy warns. “We advise renters to write the mortgage portion to the mortgage lender and the rest to the landlord, if they can arrange it,” she says. “It certainly doesn’t hurt to ask, and maybe have the landlord prove they’re current with the lender, so you don’t move in and find out they’re seven months behind on the mortgage.”

Selling the Home You Have Now

What about selling your current home? “What is shifting right now is, I think it’s more of a seller’s market than a buyer’s market,” says Duffy. “Three years ago we had 110,000 houses on the market. Now we have less than 50,000, and that includes foreclosures, short sales, new construction, resales—everything.”

Duffy strongly advises potential sellers to educate themselves and find out exactly what their home is currently worth. “

A lot of people are hesitant about the value of their property,” she says. “The media talks about how bad the market is, and homeowners just go along with what they hear instead of investigating it for themselves. A lot of people are surprised because they think their houses are devalued, but that isn’t the case for every person. There’s still a lot of pockets in Atlanta that didn’t take a hit.”

For those moving to Atlanta while attempting to sell a home in another market, Lee stresses “having a good network—working with someone that’s easy to communicate with.” When interviewing agents to sell your home, look for “someone you trust to keep you abreast of what’s going on from afar.”

And, she adds, “Sellers need to know that if they want to compete, their property needs to be in the best condition possible without financially overextending themselves. Make sure it’s clean and ready to go and properly marketed. If you’re offering a top-quality product, it’s still possible to sell.”

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