On Real Estate

Jim Valentine: Today’s time and money variables

Jim Valentine on Real Estate

Jim Valentine on Real Estate

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Real estate decisions are comprised of many components, but those with the most influence in the transaction are usually time and money. Both are usually predictable, and the focus of negotiation given their stability. Not anymore.
The trials and tribulations of super low interest rates giving rise to increasing rates, COVID-19 impacting the market in myriad ways, and demand outpacing the supply in many segments of real estate have created a lot of uncertainty in the ability to perform in a timely manner in a contract.
The money component is easy to address. Prices are negotiated, but with the rising interest rates are they going to go down? Some are, but were they too high to begin with, or are we really seeing a drop in prices? Time will tell about the overall, but there is still strong demand in Northern Nevada for a limited inventory. Prices are declining, but not like they did as we entered the 2008 recession. Rates are still good even if they are higher than they were a few months back. Negotiate your price in accordance with your understanding of the market and what it offers you for your established wants and needs.
Timing in transactions has gotten highly erratic. The slowdown in volume of refinancing and sales has allowed appraisers and inspectors to get caught up in their work. The appraisal price gouging that was prevalent during the time of rampant refinancing and frenzied sales has gone away. That was a sad testament to greed as there were appraisers charging $1,400-$1,800 for a $450-$500 job and still not delivering much quicker. They are now turning them around in a “timely manner.” Inspectors stayed the course during the rampant times but were booked out longer than usual. Lengthy appraisal and inspection turnaround times caused escrows to be extended by at least two weeks at that time and gave a sizeable advantage to the cash “as is” buyer. Nice to have a more level market these days.
A major timing factor is now in the area of repairs. Many offers are being written “as is” to compete in the marketplace, but if there are major repair items revealed during inspections that involve life-safety or high-cost items they can be brought back to the table to facilitate a close.
Negotiating the cost of such repairs is usually fairly quick for a couple of reasons. First of all, the buyer is as surprised as the buyer and knows they have to do something so the buyer can get what he bargained for. Then there is the time factor. How long will it take to get a new buyer after the repairs are made versus working with the existing buyer and closing late, but sooner than it would be with a new buyer? Either party can pay, split the cost, or rescind. A compromise of sorts is usually worked out between the parties.
The problem with repairs today is getting someone to do the work in a timely manner. Many repairs are handyman items, but the handymen are all busy. If you need a contractor, i.e.- plumbing, electrical, roof, etc., good luck! They are all busy with little time for estimates and repairs. If you can’t agree to, or your lender won’t allow a hold back, you might need to extend the time to close for the repairs to be completed. This is often handled by a credit in escrow and a closing without repairs being made… if allowed by the lender.
All parties are sensitive to the timing of the escrow and costs associated therewith. You can guess on some of the variables these days, but if circumstances don’t allow you to perform within the parameters established by the offer be amenable to a resolution that is fair to all parties as you proceed together to your collective goal… the close of escrow. There are many items related to financial and time components of the transaction that are beyond the control of either party these days. Have some understanding.
You never know which party will be adversely affected by these uncertain times. Be understanding of your counterpart when something comes up as the next one might affect you and you will want their understanding.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, BS.3481, 775-781-3704. dpwtigers@hotmail.com

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