Maybe you’ve heard and read and said enough about the dreaded virus pandemic. For raw information, there are better forums than this. But let's contemplate the pandemic’s implications in regard to your real estate plans.
Last month I wrote about “love letters” from buyers. The extreme seller’s market conditions had many desperate buyers pleading with the sellers. Take our offer, please. We’re a nice family and we love the house and we’ve been shut out so many times…
That newsletter went out on March 7th. The virus pandemic was hardly unknown at that point. But the cumulative known virus death toll worldwide (on March 3rd) was 38. Now (on April 6) the cumulative total worldwide is around 75,000.
How things change. Due to recent developments, I believe Denver has shifted from a seller's market to one more in favor of buyers. I am bearish about home prices. I hope I am wrong. But how can prices not decline? Even in the best case for recovery, a new world is coming. There are so many questions.
How will life change? Will we still go to work in offices? Will we eat in restaurants and drink in bars? How many restaurants will go under? What happens to spectator sports? Will anyone want to go? How much driving and flying will we do? Will petroleum demand drop even more than it has, and if so, what happens to the energy industry and its employees? Will the national debt go up by trillions? (Yes.) Will all those newly printed dollars be worth a lot less? Will consumer inflation follow? Will real estate prices inflate along as well or decline because of low demand?
What if borrowers stop paying on their mortgages? Will lenders stop lending? If my neighbor is not paying, why should I pay? What about credit card debt and defaults? Will a vaccine emerge? How quickly can production ramp up? Will anti-vaxers resist? If so, will the rest of us be at risk? What if nurses and doctors start to die off? Will suicide become a thing? What about all the released prisoners? Will crime increase?
My Advice for Sellers, Which I am Following Personally:
If you’ve had thoughts about selling in the next two years, get it going now. It is too early to see any new Denver real estate price trends. But picture this. Suppose a month from now we see that the eight-year-run in Denver real estate is over. Year-over-year transaction prices are down by say, 5 percent, and they’re threatening to head lower.
I don’t mean list today, necessarily. (But I am personally listing two investment properties for sale this week.) Just be ready to do it on short notice. Clean up the house. Get the mall improvements done like paint, carpet and landscaping. You can pass on the major improvements - they generally don’t pay (or they pay less) in a sinking market.
If I’m wrong and the bear market never comes, you’ll have spent a few bucks on improvements you will enjoy. If I’m right, your ability to hit the market quicker may bring added net sale proceeds of thousands of dollars. The risk-reward seems favors the nimble.
This last part may seem self-serving, coming from me, but it is not. Contact an experienced real estate broker. Not your barber with his broker license in a drawer. Call a savvy broker who has been in the trenches. Ask for a current price analysis of your home, less meaningful though it may be, based on past comps. Consider what you’d accept in a declining market.
Denver was a seller’s market for so long that it’s now hard to swallow. But I’d say tables may have already turned and buyers are in the driver’s seat. Buyers with a plan, a down payment, and pre-qualification for a loan will be pursued. Better agents will compete to work them while slower-footed sell-side agents accumulate listings that don't sell.The best listing agents will carefully select and "pre-qualify" good sellers.
If your listing agent is willing, sign a listing agreement (an Exclusive Right to Sell) in advance. Do it even if you have no immediate plans to list. The agreement can be short-term, expiring in 30 or 60 days. It does not really obligate the agent to work with you,.nor obligate you to sell. But it may help put you on the their A List. Get at least a low-cost photo package done, if your house is ready for it, and have the agent write up your MLS listing in advance. (The agent typically pays for photos; ordering them may be tougher when all homeowners start heading for the exits.)
My Advice for Buyers
For buyers, the new world may bring opportunities you've never seen before. Interest rates are at a generational low. Sellers may be coming out of the woodwork. Listing prices may drop substantially (they haven’t yet, noticeably). Even without lower list prices, many sellers may be willing to negotiate.
More acceptable than in the past will be sight-unseen offers. That is, offers submitted without having actually visited the property. Don't be afraid of these; they're typically contingent on a satisfactory walk-through. Virtual tours have proliferated, offering more information that ever. With the virus concerns, many sellers simply won’t want a lot of strangers tramping through their homes.
Sight-unseen offers are not a job for Bob the Barber. An experienced agent has multiple tools for putting your offer at the top of the pile. Your buyer’s agent needs to call the listing agent and ask what will help make the offer fly. The sellers may want a quick closing, a limited scope inspection, or a Post-Closing Occupancy Agreement. To best server the buyer, an agent needs to think like a seller.
Finally of course prospective buyers must get pre-qualified for financing before shopping. It is free, easy, and quick. Your real estate broker has a list of good lenders. Hopefully including some who aren’t too overwhelmed to process your file. Without a pre-qual letter, you’re not in the game. Not even now.
In my 10-plus years in real estate, I have never been so bearish about the Denver market. I could be wrong about everything, and I honestly hope that’s what happens. But we must prepare and protect ourselves for any circumstance, and live for the day when life in Denver is like it was last year.
Footnote: There are many smart analysts who have a very different forecast for Denver real estate. One is the brilliant Lon Welsh, a founder of Your Castle Real Estate and First Alliance Title. Here is his take, written specifically for real estate agents.