Frequently Asked Questions for Buyers.

Why should I buy now in a soft market?

The "softness" in the Portland market is focused on certain neighborhoods and developments. This is making for some great deals, but also plenty to shy away from.

I focus on neighborhoods in the east and south sides of Portland, which include Clackamas, Happy Valley, Lake Oswego, Oregon City and West Linn. These neighborhoods have either established values or remarkable opportunity due to an extension of the Urban Growth Boundary. The hot-button markets of the Pearl District and South Waterfront are trouble for all but a few highly capitalized investors looking for long-term opportunity, and can weather a troubled short-term situation.

I see four great buying situations right now:

1. New Construction: By far, the greatest opportunity is in new construction. Developers rarely mark down the sales price of their property (because this is public information, and sets a precedence for future negotiations), but are usually willing to offer you tens of thousands of dollars in perks. Because this area is saturated with new construction projects, this competition is fierce. 3-car garages, granite countertops, exotic hardwood floors ... it's all up for grabs. I even heard of a family asking for - and getting - airfare for four to Hawaii. If you're in a decent equity position in your current home, and have been considering new construction: Now is the time to buy.
2. Relocation: If you're transplanting from another market (across town or cross country) there are great deals to be had. The market is FLOODED with motivated and fatigued sellers, looking to work with well-qualified buyers. Although value in the Portland area has only slightly retreated, the length of time an average home is on the market has increased dramatically, which can signal great opportunity for a buyer with other purchase options in front of them.
3. Distressed Sellers: This is an overstated problem (see comments about predatory lending below). The condition of the eminent foreclosure causing a family to sell for pennies on the dollar is mostly myth. A distressed seller is simply a motivated one. Whether they feel overwhelmed, are overreacting to present market conditions, or find themselves in a shallow or nonexistent equity position - it makes for great buying opportunity. We have more leverage in negotiations with a distressed seller.
4. Remodel vs. Move: If you're considering spending $80,000 on remodeling your house - and have the equity or capital to do it - now is the time to consider climbing the property ladder instead. If you're sitting on a house you bought in 1998 for $200,000 and it's now worth $350,000, considering taking your $150,000 in appreciation and putting it toward a home in another area where you may get newer construction, better schools or a better neighborhood.

Poor buying situations right now:

1. 100% financing Positions: The secondary mortgage market has put a stranglehold on these types of loans. If you are unable to put at least 10% down - it may be worth your while to wait.
2. Luxury Condos: Hundreds of luxury condos have been bought-up by real estate investors and speculators. Property tax abatements have been handed out like halloween candy to wealthy developers in downtown portland - all fueling a very foreseeable problem. One needs only to stroll along the street of the Pearl District and glance at the dozens of realtor® lockboxes that hang from utility pipes outside the parking gates to fully appreciate the problem.
3. Shallow-or-negative Equity Positions: Buying a home is expensive. You usually have to sell your previous home and buy a new mortgage for the new one. All the while, you're paying commissions to everyone along the way. Unless your value has appreciated enough to cover these expenses and still warrant a move, consider holding a bit longer.

Are the highly publicized predatory lending practices contributing to the buyer's market?

It certainly is. However, it's a bit overstated and the opportunities are more complex. The media uses examples of "Foreclosure rates jump 30%" and "Mortgage delinquencies rise 20%" (these are just examples). This is a bit deceptive because they're tracking a percentage increase in a very small percentage itself (Mortgage Banker's Assn put Oregon at 2.6% for the 4th quarter of 2006 - ranking Oregon as 49th in the country for mortgage defaults). So even if that default figure doubles, it's still about 1% of the overall market being affected. Although a 1% increase is a significant opportunity for institutional investors or speculators, it's likely too small to be genuinely felt by a buyer seeking a single family residence.

The more significant opportunity may be in the concessions lenders are willing to make to avoid foreclosure. The include short sales - a situation where the home may be sold for lower than it's purchase price. In this situation, we have to work with both the seller, and their mortgage holder.

But the most significant opportunity may be in capitalizing on the hysteria. Sellers are scared by the media reports, and are offering homes for sale at very reasonable prices. More significant is the negotiation power a buyer has once they're in a transaction. Once a well-financed buyer has been identified, a jumpy seller will be more inclined to accept terms to keep the deal alive.

Ready to get started? Call Patrick at 503 734-0337 or e-mail patrick@patricksheehan.com right now.