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Buying a Home? New Construction Offers Many Benefits
A lot of the homes currently for sale in Lehigh Valley require some type of updating whether it be the bathroom, kitchen, windows, carpeting or other household systems. If a Lehigh Valley Home Buyer is interested in the house they will take the updates into account with their offering price. Right?
Typically, a Lehigh Valley Home Seller will list their home with the thought that if a buyer is interested and they are concerned about the updates they will just make a lower offer.
Having worked with many home buyers, here is where I believe the flaw is in that thinking.
Most of the home buyers are using FHA financing. The odds of FHA financing go up as the home price goes down.
FHA financing requires a minimum of a 3% investment by the buyer. FHA also allows for a 6% seller’s assist to help pay the closing costs. Many of the transactions, which use FHA financing, usually ask for some amount of Seller's Assist.
What this means is that the buyer has very limited funds. They can afford the mortgage but they don’t have a lot of available cash. If they can get the house for $10,000 or $15,000 less they will save about a $100.00 per month on their mortgage but they still don’t have the money to do the upgrades. If the upgrading outweighs what they feel the future can afford, then they won’t make an offer because the mortgage savings isn’t enough to do the upgrading.
Now, contrast that with a buyer who has access to funds. They can say “if I can get it for this much I’ll do the upgrades”. I had a home buyer out a few weeks ago who was looking to purchase for $300,000 cash. The closer the house got to her limit the more it needed to be exactly what she wanted. For a house with a price of something like $240,000, she was willing to completely redo the kitchen, bath, or both. For $289,000, it had to be exactly what she wanted.
The problem is that the cash flow buyers are far and few between. So, what happens is that a buyer, who has limited cash funds, will go after a house that may not be in the exact neighborhood they want or be as large as they want but will have some of the major upgrades done (new kitchen, bath, roof, furnace, windows…etc).
What does the Lehigh Valley Home Seller do about this? They are willing to take less for the house but they are concerned about dropping the price because the home buyer will always offer less or they want to try and hold-out in hopes of getting their asking price. In the mean time, the days on the market is going up.
My experience is that if the house is priced correctly to attract the largest amount of home buyer's, the offers still tilt in favor of the seller.
I recommend dropping the price to catch the "lower end of the pricing range" buyer. That is the home buyer who is willing to take the house , needing the upgrades, because it it has other positive features they like. They'll worry about the upgrades later.
A difference in $10,000, on a home price, may bring a complete new set of Lehigh Valley Home Buyer's into the home who are willing to make an offer even though the house needs upgrading.
The Lehigh Valley Home Seller may already be willing to accept this lose so why not go after the home buyers that will be less picky about the updates? If priced correctly, multiple bids are still happening since buyers are usually looking at the same properties. This may not mean a higher price in today's real estate market but it could mean a contract with better terms with respect to the inspections, deposits, and other contract terms.
Visit www.LehighValleyHomesOnline.com for more information.
