Tuesday, June 22, 2010
The dire housing market has left buyers with an upper hand and sellers with few choices. The government's $8,000 tax credit for home buyers program recently expired leaving the seller's market weaker than ever. Under the terms of the program, buyers were required to get a signed sales contract by April 30 and complete the sale by June 30.
There was a nationwide housing market fall about a month ago immediately following the expiration of the housing tax credit. In some areas of the country, sales dropped over 20 percent from the prior year.
The conditions for those attempting to sell their homes are worse than ever and buyers are taking advantage of these opportunities to make unreasonable demands of panicked and desperate sellers. Last-minute demands for concessions, improvements, and substantial price reductions are becoming common of buyers who believe the seller will meet any demand to avoid ending up underwater and being forced to sell the home through the bank.
Buyers sometimes reserve these tactics for when the inspection is conducted on the seller's home. The buyer will make unreasonable demands for repairs or improvements on the home leaving the seller feeling trapped in the deal. If the seller refuses the demands the only alternative option is putting the home back on the market somewhat damaged.
These conditions have also adversely affected builders. According to the Commerce Department, new home construction fell 17.2 percent from April and permits being issued for new construction fell 10 percent. Home mortgage rates are the lowest they have been in decades but this has done little to boost the market. There has been more than a 30 percent decrease in the number of home loan applications compared to last year.
Buyers think they are playing it smart by taking advantage of struggling sellers but these demands will eventually meet a wall. In some situations, it's not a matter of negotiation and the seller cannot afford to concede anything further because knocking off another $5,000 will force the seller underwater. Buyers feel they have the upper hand and should get the best deal possible and sellers are frustrated to see their home traded for so little. The conflicting expectations of both parties often times lead to disappointment on both ends, even when a sale is successful.
Fortunately, the Senate recently approved a three month extension to allow homebuyers to complete qualification for the tax program that helped increased home sales last spring. Homebuyers now have until September 30, 2010 to complete their purchases and qualify for the tax credit. This will allow the large number of homebuyers, roughly 180,000, who were in the process of purchasing homes but just missed the deadline to complete these purchases.
This silver lining, however, is only temporary and the brief period following the original close of the tax credit program and the extension period was very telling of what the state of the housing market will become once the tax credit program expires for good in September.