Home Price Sticker Shock

Homes With Price Bubbles OverheadIt comes to no surprise to us in the Washington DC area that this is one of the most expensive areas in the country to live. Home prices, relative to home prices in many other parts of the country, are high. Very high. The sticker shock people get when they move here (or want to move here) from other areas is palpable. You can hear people catch their breath.

It’s too bad, really. It would be nice if a three bedroom, two bath single family home with a garage and a yard could  be purchased for, say, $50,000. There may be a few of those houses out there but, undoubtedly, they’re seriously trashed and need lots and lots of repairs.

It would be nice to get that same home for around $200,000 but that’s unlikely, too.

Short Sales

As I’ve written about before, short sales are not really short. They take a long time and it really doesn’t have anything to do with the buyer. It has everything to do with the seller and the seller’s bank.

Sometimes, you might get lucky and the bank and the short seller will have done all the preliminary work that needs to be done and the bank has set a price they are willing to accept. Most often, that is not the case.  Even if it is the case, it is the rare buyer that will say, “OK, the bank wants $210,000. Let’s offer $210,000.”

Nah. The typical home buyer wants to negotiate an even lower price which, of course, slows the whole process down some more. So much so that the short sale may not even get to settlement before it reaches…

Foreclosure

A foreclosed home is another animal that may be purchased for a “discount”.  Of course, by this time the bank is supposed to be the owner of the property and some bank clerk somewhere should be able to make a decision.

Unfortunately, many times there are issues with the foreclosure title. It hasn’t been recorded properly or recorded at all. The bank clerk takes their sweet time responding to offers. There are no repairs whatsoever.

It’s a mess. But, for the right person with the right amount of money to be able to buy a house and make the repairs, a foreclosure may be the way to go.

Standard Sales (the “regular” way)

The easiest thing to do is to sell (or buy) a house the regular way. It’s what we call a “standard sale”. The seller doesn’t have to consult with the bank to approve the sale. If all goes well, there will be enough money from the sale of the house to pay off any existing mortgage as well as the other costs of the sale such as the transfer and recordation fees required by the State and County as well as Realtor fees and title company fees.

Because there are fees other than the cost of paying off the mortgage and because the mortgage needs to be paid off, the price of the house is not going to be the “fire sale” price a lot of people hope for. Even homes that are in economically depressed neighborhoods sell for good money if there is enough land and enough other amenities.

This is where the sticker shock comes in. It seems that people from other parts of the world are used to houses costing much less. In some cases, a whole lot less. It’s not hard to understand that if a three bedroom, two bath house with a garage and a yard only costs $100,000 in, say, Michigan (my mother-in-law’s house sold of $42,000 in a nice suburb of Detroit) the sticker shock of the same type of house selling for close to $300,000 would be severe.

Why Sticker Shock Hurts Sales

Unless, the person buying a house really wants to buy a house, they may very well walk away.

I’ve worked with many a person looking to relocate to this area (or thinking about it) only to decide that home prices are way too high and they just stay put in South Carolina or Michigan or wherever they’ve come from thinking houses will be cheap.

There really isn’t anything to be done about it. As the saying goes, “It is what it is.” Prices are a function of supply and demand and what the market will bear. Right now there is very little in the way of housing inventory and even though existing home sales have slowed down a bit recently, prices are still moving up.

Eventually, people will get over the sticker shock and realize that if they want a home that’s comfortable to live in and in a nice area, it’s going to cost. The best thing to do is consult with a good mortgage professional to talk about the money part and then call me to find a house you’ll love for years to come,

About Ken Montville

Ken Montville is a Realtor® and Associate Broker with RE/MAX United Real Estate in the beautiful Maryland Suburbs of Washington, DC. He has been selling nice homes since 1999. Way back in the 20th Century.

When Ken Is not doing the real estate thing he can be found all over social media in places too numerous to mention and he listens to jazz, reads a little (mostly non-fiction), hangs out with the Rotary Club of College Park, MD and can be found blogging at MDSuburbanHomes.com