There was a time, not so long ago, when a buyer could offer pennies on the dollar for a dream home in South Florida. It was not rare for a potential buyer to offer up to 25% or more below the asking price. After all, the market was congested with available homes and the economy was in a deplorable state. However, times are changing and making an unreasonable offer can actually hurt, instead of help a buyers chances of securing their dream home.
Across the United States, including South Florida, more and more homes are being purchased at higher than normal rates leaving very little inventory for realty agents to work with. A potential buyer who comes in and makes a very low offer often finds him or herself being left off the radar when being compared to other, more serious buyers.
In other words, a buyer no longs holds the power, sellers do. A seller is likely to come back more aggressive if he or she receives a low-ball offer compare to an offer that is reasonable or closer to the asking price.
Home values in South Florida rose 1.1 percent year-over-year in March, to $141,300, after reaching bottom in late 2011. Only Phoenix had a higher year-over-year increase at 2.8%. Moreover, Miami ranked among just five cities in the nation to show an increase in annualized housing prices in February, up 0.6 percent from January, and up 0.8 percent year-over-year.
Consequently, a low-ball offer may still work in some communities were one can find stockpiles of inventory, but these are far and few between in places such as Chicago, Miami, Washington D.C., etc. For example, some out of town buyers still appear to be under the impression that all Florida real estate remains depressed. They insist on submitting offers that make no sense in today’s environment.
As such, a buyer who is serious about purchasing a home must ask themselves whether the risks out weigh the potential reward. Put simply, if the property has potential to be your dream home, don’t be cheap or you will risk losing the home altogether.
Distressed Properties Still Dominate the Market.
With that said, however, the real estate market is still far from a full recovery. Prices continue to remain low compared with prices just five years ago. In Miami, prices fell 50 percent from the peak, and are just up 2 percent since reaching a low in April 2011
Prices may not return to the price points seen just a few years ago for some time still. So now is a good time to buy a property. Especially when you consider that interest rates continue to remain at historically low interest rates.
Therefore, while the market is moving in a positive direction, it will be some time before it can attain a healthy state.
The reason being is that distressed properties still make up more than 50 percent of sales. That is down, however, from more than 60 percent a year ago. Distressed properties are keeping a lid on properties, and they will continue to do so for some time.
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