A couple of weeks ago, I wrote about how often I’m asked by people who understand the evils of misused subprime loans to do loans that were made possible only by the loose lending guidelines of the subprime era! The irony of it is a little crazy-making, so I took the opportunity to vent. (Thanks, readers!)
In all fairness, though, what I’m actually seeing more often among homebuyers and sellers these days is the opposite — people who have learned from their mistakes (and others’ mistakes) and are trying hard to apply the wisdom from them in the course of their post-bubble-burst real estate decision-making.
Sometimes they take it too far, but many of the buyers and sellers who are active in today’s market are working hard not to repeat the errors of the immediate past era.
Today’s buyers are most often acting out of an effort to avoid the pain and turmoil they’ve seen their friends and relatives experience when they lost a home through foreclosure or ended up totally upside down. Sellers are taking care to prevent the fiascoes they’ve witnessed whereby their colleague or neighbor allowed an overpriced listing to devolve into a traumatic short sale or worse.
Before the bubble, the attitude of many of us real estate consumers was very similar to that reflected in the recent hip-hop hit, "Just Throw It in the Bag."
The song, by rapper Fabolous, is a love song of sorts, whereby the young man lures in the ladies by extolling his financial wherewithal, which is so vast that she needn’t investigate how much her desired trinkets cost. Rather, she should, as the title says, "just throw it in the bag."
It was sort of a "don’t ask, don’t tell" policy: We won’t ask questions, just get us "X" house by any means necessary, and don’t ever tell us the whole picture of what we’re getting ourselves into. Actually, in my experience, even when we did tell, many buyers kind of stuck their fingers into their ears and sang the loud "la la la" of a child trying to drown out unwelcome information.
Sellers wouldn’t ask how on earth their homes could be worth 30 or 40 percent more than they’d paid five minutes ago, or how it was possible or sensible for a lender to finance that despite the lack of any increased actual value in the property. Why should they?
In contrast, if I had to clump the smart reactions of homebuyers and sellers to the recent housing crisis under a single descriptor, it would probably be "conscious." It’s as though the critical masses of real estate consumers have simultaneously, as the scripture says, put away such childish things as the "just throw it in the bag" mentality.
Sellers want to be confident that even the highest of multiple offers is reality-based so that it will actually close. Buyers want to know the details of their total homeownership costs projected far out into the future, so that they can take steps to ensure their mortgage obligations are realistic and sustainable — before they sign their loan documents. …CONTINUED
This new consciousness, or "awakeness," means that everyone reads and plans more. Buyers are reading their good faith estimates more — and asking questions about things they don’t understand. They’re also reading books and articles way in advance, preparing to be smart homebuyers. And, as a result, many of them are paying off credit cards and boosting their savings in advance of ever placing the first call to the mortgage broker.
On the seller side, I find sellers reading their comparative market analyses much more intently than before. If they’re selling now, they really need or want to sell, and they realize that overpricing will stop that sale from happening. So they read and analyze recent sales data better than ever before, in hopes of finding that pricing sweet spot that generates the much-desired multiple-offer/bidding-war scenario.
And if they get multiple offers, rather than taking the highest price as a knee-jerk reaction, sellers — institutional and individual alike — are reading buyers’ approval letters, financials and other offer terms to ensure that the offer they accept is the most likely to close, rather than just a falsely lucrative hypothetical that won’t appraise or obtain financing when all is said and done.
Overall, I’m seeing buyers and sellers reaching out to seize control of their own transactions, given that they are now all so intensely aware of how the decisions they make while buying and selling can influence their families’ financial destinies for years to come.
My sellers are getting serious about decluttering, pricing, disclosures and even allowing access to buyers, doing everything within their considerable power to maximize their homes’ marketability.
And buyers — they’ve become enamored with homes that empower lean, green living, and are much more likely than before to make compromises in terms of the property they buy itself rather than shooting up the price ranges to buy exactly what they want. They are doing upfront budgeting to get clear, amongst themselves, on what they can really afford.
Out of an effort to avoid becoming overextended, many are buying homes at prices far less than their lender has approved them for, even though that approval is based on dramatically more conservative lending guidelines than those of recent years.
I recently read a definition of the word "apocalypse" that focused on the word’s Greek origins, which had nothing to do with the end of the world, but rather, according to Wikipedia, "applied to the disclosure to certain privileged persons of something hidden from the majority of humankind."
The foreclosure and housing crisis of 2008-09 is popularly seen as something that stripped many of the ostensible privilege of housing-based wealth. But perhaps the reality is that it actually created a new class of real estate consumers privileged to have the advantages of the wisdom disclosed by the market over the last few years.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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