Psychologists of the not-too-distant future will have fun with the last 6 years—as they try to categorize what was going through people's minds while the real estate market was imploding. Real estate, as a market had been sold to all of us Americans as the biggest wealth-building machine ever concocted. It was clear (back then) that house prices would always go up, and that if you bought the most expensive home you could afford, when you sold you would be rich.
fact, the IRS regulations for home ownership aided and abetted our
beliefs that home ownership was THE WAY. Back in the 1970's, if you
sold a home the IRS would tax you on the profits—unless you spent
your proceeds on another home. Without going into the fine points,
basically if you didn't want to share your profits with the
government, you had to “buy up”. This had the unintended
consequence of driving up prices on high end homes, and there were
some difficult accounting gyrations to make these trades, but they
were worth the effort.
then the tax regs changed, making selling a house and keeping the
profits even easier. The new regs (no doubt about to be adjusted some
more) made a married couple immune from paying taxes on the first
$500,000 in profits made on the sale of their family home, and you
didn't have to buy up, you could sit on the money and rent, or sail
around the world. For the last six years, has this IRS reg has not
been much of an issue for my clients.
have had dozens of clients who thought of their home as a piggy bank.
Whenever they needed some cash—for a vacation, a new car, a
wedding, they would simply refinance. These are the Americans who
today are either trapped in a house that has lost significant value,
who have lost their home, or who have seen the future and decided it
will take too long just to get back to even—and so to give the keys
back to the bank makes sense to them. Just yesterday a woman I know
who lives in a home that is way too big for her told me she, “hates
the house and would sell it,” if she could break even, “but I
won't give it away!”
brings me to the pent up demand for homes and the built up desire to
sell. A new survey released just this week revealed that 33 percent
of people currently searching for a home have been on the hunt for
more than a year, and that the vast majority of them are willing to
negotiate with sellers and make compromises to find their next home.
the decline of the housing market in 2006, many would-be sellers
refrained from putting their homes on the market due to reservations
about decreases in home values. As the real estate market recovers,
the number of homes available for sale remains a challenge for the
industry. Listed inventory in April is approximately 14 percent below
last year, which underscores the dramatic reversal of the
previous years’ buyers’ market status. With an increase of buyers
coming into the market, the lack of available homes for sale has
presented challenges for first-time and move-up homebuyers.
the last few years, many homeowners have been hesitant to list their
homes due to unfavorable economic conditions. Today, the recovery in
housing continues to gain momentum, and with so many buyers in the
market who are competing for so few available homes, it is a great
time for sellers to speak with a real estate professional about the
advantages of listing their home. There are plenty of buyers--some
serious, some opportunistic shoppers--in the market who are actively
making offers, but due to low inventory and many houses receiving
multiple offers, bidding wars are becoming more common.
are being made, but sellers are not looking for bottom-feeders. So
not all of the offers are accepted: 42 percent of those searching for
homes have made an offer in the past six months yet only 11 percent
have had their offers accepted. Current
homeowners looking to buy are more than twice as likely to have their
purchase offer accepted as those who rent (15 percent vs. 6 percent).
However, renters are nearly three times as likely as homeowners to
report that they made an offer but couldn’t agree on price.
(Remember renters may be former homeowners with bad credit due to a
foreclosure, who want a creative deal. Rent with option to buy is a
favorite just now.)
The recovery has transformed the mindset of many buyers and sellers who
grew accustomed to the always going up market we saw for years. We're
now in a situation where buyer confidence is building back up and
demand is strong. As the survey indicates, sellers are now in a more
are willing to make compromises to find their next home. With
competition stiff among buyers, many are willing to make compromises
on both the home itself and in the negotiations with the sellers in
order to get their offer accepted.
top compromises they’d be willing to make include being flexible
with the closing time; purchasing the house as-is; and putting more
cash down than they had planned. Others
would compromise on amenities/features, including a
built-in pool; an updated kitchen (e.g., stainless steel appliances),
nice to see compromise in real estate, when both the buyers and the
sellers expect too much, everyone is disappointed. Maybe we are
entering a period of adulthood. Buyers understand that they will take
ownership of a home that might have some flaws, while sellers will
have to accept less money than they had hoped. But with this
compromise we can go forward.
Hahn is a real estate professional serving the Sarasota and Charlotte
county areas. He can be reached at email@example.com
or by phone at 941-681-0312. See him on the web at