An opportunity for first-time buyers to find houses priced below market value is presenting itself in a number of places across the country.
Over the 11-week period after March 11, when the World Health Organization declared the COVID-19 virus a pandemic, thousands of sellers listed their homes at a discount, according to Weiss Analytics. Not always by a huge discount -- perhaps just a few thousand dollars -- but significant enough that bargain hunters should perk up their antennae.
Even when sellers don’t drop their asking prices, nearly 7 in 10 would be willing to accept a lower offer just to get to the closing table, according to a LendingTree survey of nearly 1,000 people who currently have their homes on the market.
Just over half the sellers polled by LendingTree said they’re “seriously worried” about selling their homes because of the pandemic and resulting economic recession. An additional 36% are “somewhat concerned,” and nearly a third are “extremely anxious” about selling anytime this year.
New listings at or below the $200,000 range are the most likely to be discounted, Allan Weiss, a co-founder of the popular Case-Shiller price index, told me in a phone interview. And the lower the price range, the deeper the discount -- up to 70% in some places.
More often, though, houses are being priced just $2,000-$3,000 below market, Weiss said. Not in every market, but in what he called “micro-clusters” of neighborhoods and communities where house values are no higher than $200,000. Even in spots where median prices are rising, discounted properties can be found.
Sellers offer their homes at below-market prices for any number of reasons. They may want to sell quickly. They may owe little or nothing on a property that has increased in value over the time they’ve owned it, so undercutting the market isn’t so painful. But they also may be unemployed and no longer able to handle their house payments.
Whatever the reason, many in the lower-price tiers seem to be lowering their expectations. “Every single metric -- sales volume, median price -- gets worse as you filter down from $200,000,” Weiss told me.
At least one-quarter of new listings in the nation’s Top 25 metro areas are discounted, according to Weiss’ analysis. Three small Texas metro areas -- El Paso, San Antonio and Killeen -- currently offer the largest percentage of properties priced below market. But bargains can also be found in major markets like Wichita, Kansas; New Haven, Connecticut; Akron, Ohio; Portland, Oregon; and Philadelphia, Pennsylvania.
Signs of the Apocalypse: Just before the pandemic struck, the co-founder and former CEO of Zillow listed his Los Angles manse for $24 million -- nearly $8 million more than the site’s oft-maligned automated valuation Zestimate model says it’s worth. Some realty agents have complained that the popular tool is wildly inaccurate.
Meanwhile, some people can never change their stripes. To wit, one of the first people charged with trying to scam the Small Business Administration’s Paycheck Protection Program is a convicted mortgage fraudster.
Kurt Sanborn, a former spokesman for the Lowell, Massachusetts, police superintendent, was convicted and sentenced to 27 months in prison in 2014 after pleading guilty to federal mortgage fraud charges. Now he’s been charged with conspiring to seek SBA-backed forgivable loans intended as COVID-19 relief.
Speaking of fraud, attempts to electronically intercept real estate transactions remain big business for swindlers.
According to the FBI, these thefts are part of a fraud category that tops the list of high-loss crimes, resulting in almost $1.8 billion in losses to businesses and consumers. By comparison, investment and real estate rental fraud ranked fourth and fifth on the FBI’s list of top crime losses, costing a “paltry” $222 million and $221 million, respectively.
Wire fraud occurs when thieves intercept emails, so real estate agents should never send instructions electronically. If you receive something via email from your real estate or settlement agent, check out its authenticity before doing anything else.
Telephone utility fraud is also on the uptick. In this type of ruse, a scammer calls saying you were overcharged by your (unnamed) energy supplier and are due a refund. In another version, the reprobate offers a big discount. But to verify your identity, they say, we need your account number.
If you are on the receiving end of one of these calls, hang up. The key is that they don’t know the name of your utility or supplier. Moreover, a utility will not call you about a refund or discount, and a licensed and reputable energy supplier is required by law to give you the company’s name and license number.
If you are not specifically represented by an agent when you purchase a house, you are not entitled to the share of the sales commission that your agent would have earned, had you had one. Under the law in most states, you must be a licensed professional to get a cut of the deal.