The market is definitely changing. Since May prices had been steadily rising and buyers (both investors and homeowners) where very aggressive in trying to purchase properties.
Fast-forward half a year and things have changes. Homeowners seem to be not interested in buying anything right now, the tax credit is gone, it is the slower season and prices have gone up. Investors, other then most of the ones I know, seem to be as aggressive as ever. They are paying prices based on July comparable sales and really overpaying in my opinion.
Some of the things we are doing differently with this in mind:
- Lowering our Prices
This is obvious, but at this point we are offering 10-20% less on the same properties.
- Raising Commission on our Re-Sales
We used to offer 2.5% commission to the Buyer’s agent that bring offers on our re-sales. Now we are up to 4% on most of our listings.
- Rent-able, if we cannot Sell It
We are trying to stay in the “entry-level” price range. If the market does change we want multiple exit strategies available (aka renting the house out at positive cash-flow).
- Being More Negotiable
When we do get offers we are a bit more flexible with the Buyer’s.
- Keep Buying Good Rentals
Being Landlords is a big part of our business model right now and we still plan on buying as many rental houses as we can afford and make sense.
- Low Balling the List Prices
- Oftentimes, we could pay list price or over list for houses and turn a profit. There are still a couple deals like that, but now oftentimes our max purchase is 10%, 20% or 30% under list.
I am unsure how much of this change is seasonable and just based on the slow winter months. Last year wasn’t like this, but that might have been because of the tax credit.
Luckily, we have a couple escrows open for resales and not too many properties in our inventory. The couple retail deals we have left we have good margins in them and if we cannot find any Buyer’s they would make great rentals.
That being said, it’s definitely time for investors to be careful!