Here’s what I wrote about item #1 on the list last time:
6 months ago is ancient history. What your neighbor sold his house for 6 months ago doesn’t matter. What the seller was asking for the house 6 months ago doesn’t matter. What matters is what the market will support today.
So, how are things the same and how are they different? A couple of things that need to be discussed:
How are things the same?
- What happened 6 months ago is still ancient history. Since I wrote the first piece, Fannie, Freddie and FHA have tightened up their appraisal guidelines and they will no longer allow an appraiser to use a sale that is more than 90 days old unless they have no other comparables and can write a 5 page essay of why they need to use that one.
- I can’t tell you how many times over the last 12 months, I’ve heard people say, “3 years ago, the seller bought the house for $100,000 more than what I’m paying the bank for it. I’m getting an awesome deal!” My first response is, “Maybe.” Maybe you are getting a deal. But maybe the seller bought it at the peak of a bubble in the market and paid way too much and now things are just adjusting down to the market. Maybe it’s not down to what the market will really absorb for the house and if you tried to sell it next year, you’d end up selling it for less than you paid for it.
- “They just dropped the price by $50,000!” This is a great deal! Maybe, but then again, I can put my house on the market for $650,000 and then offer to give you $100,000 off the asking price. Is that a good deal for my house? (Hint – my house is still WAY overpriced at $550,000 – but I’ll sell it to you for that.)
So what is different? A couple of things are a bit different from last year:
- The First Time Home Buyer Tax Credit/Buyer Frenzy – If you are any where near the radio/newspaper/any mortgage lender or Realtor, you’re Read more