[Music] Hello everyone and Welcome to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I am your host as always Stan McCune realtor here in Greenville in the greater Greenville area if you need to reach me for any reason if you need a realtor if you want to talk about the Pod whatever the case may be my contact information is in the show notes you can reach me by text by email by phone whatever suits your fancy I am available for you and with regard to the podcast I'd appreciate for those of you that listen please go ahead and hit that subscribe button make sure you don't miss future episodes make sure that you download these episodes that helps as well I guess in some way with the algorithm and if you can just leave me a rating leave me a review not I mean not necessarily me personally but the podcast you know on it iTunes or or Spotify or whatever app it is that you use go ahead and give me on this podcast a rating I would appreciate that if you could leave a review some kind words I would appreciate that as well all of that helps to further the podcast today I'm just going to have a brief I think unless I go on a tangent here a brief little discussion about how I think that this Market that we're currently in is different than the market in 2006 2007 CU we're starting to see some some aspects of okay frenzy that similar to 2006 2007 right before the the economy crashed basically during what we call now the Great Recession and some people are saying oh my goodness this feels just like it felt in 2005 2006 2007 before the bubble burst I don't think that that what is happening now is comparable to them to to back then even if some of the numbers look similar and the reason for that well there there are a variety of reasons and and we're going to get into a few of them here but it is different in in a lot of ways and the first way that I would say it's different is back then everything was the bubble was created based on loose lending a lot of people that should not have qualified for for financing were qualifying for financing because Banks weren't weren't being careful people were getting you know all sorts of crazy non-recourse loans and 0% down loans and and all sorts of of ridiculous things and what was happening is people were assuming oh I I can't afford this house I know but what I can do is I can just buy it it'll appreciate by 10% and then I'll sell it next year make a little bit of money and just keep keep doing that right there there was just this endless optimism oh even if I don't think I can afford this house I'll just sell it in a few years and all will be good and well well of course what happened was when the Bubble Burst when all the sudden a lot of people couldn't start to make their mortgage payments and then foreclosures started happening and then the economy started receding and then we had the Great Recession home values in a lot of areas I'll mention it was a little bit different here in the Greenville area but in a lot of areas the big urban areas home values really started to decline and so then people found themselves in a really bad situation they bought house last year for $500,000 assuming it would be worth $550,000 in you know the next year let's say they bought it in 2007 500 they assumed in 2008 it would be worth $550 but instead it was worth less than $500,000 and they couldn't make their mortgage payments those were the people that started to get foreclosed on because now they're in a situation where they couldn't sell they didn't have a backup plan they didn't have a way to get out from under that mortgage why I think that that is a completely different type of scenario than what we're we're seeing now is it possible that home values won't go up to the same Pace in the same way that they're going up right now like right now they're going up like 11 12% Market wide Market wide in the greater Greenville area 11 12% per year that's not a that's not going to keep going all right let's just be honest most areas in our Market are appreciating more at like a 5 6% Pace annually there are some areas we talked about this in the past some parts of Greenville that consistently appreciate 15 to 20% per year those are the more transitional areas and so we we do have that but Market wide for us to see 11 12% is crazy if you're banking on that you should not okay don't Bank on that but I don't think that most people are I think that most people are at least what I am hearing in the marketplace most of the people that are purchasing real real estate right now they even if they're paying top of the market this is where they plan to settle down for a while and they can afford it they don't anticipate that they will have to sell within a year or two or whatever the case may be they are actually planning to stay there they're not speculating they're not playing the real estate game like the stock market game where they're day trading you know except it's their it's their primary residents that their day trading we're not seeing that to the extent that we saw that 15 years ago now the other thing though that I think is is the more significant part of this equation The Lending practices have tightened up dramatically in fact we're seeing some lenders right now that and and some of this is is government imposed they're really tightening down on renting on sorry lending to investors on rental properties particularly with these with these kind of main you know conventional types of loans obviously there's always money out there you know with these non-conventional type of lending institutions but conventional loans things that are government-backed those have gotten really tight because there is concern we talked about this in the past as well there is a there is concern in the government that maybe investors might get in over their head now I and I can see that I can see that and that would have a bad ripple effect potentially for the economy and so lenders and and the government are responding to that and they're tightening this up and actually a lot of lenders last year on their own at least here in the Greenville area started doing that I called a bank that I had used for investment properties rental properties in the past at one point last year after covid and they said we are not lending we won't even accept your application we're not lending on any rental properties at the moment we're tightening things down so banks have learned they don't want to go through what they went through in 2008 2009 they don't want to go through that again but what people are doing now what what we are seeing now that we weren't seeing back then is people bringing a a ton of cash to closing and this is where it's really a crucial difference I've ran some numbers that there's not a ton of data that's easily accessible out there but you can Google this if you're really interested but the amount of of cash purchases has steadily gone up each year for the past several years here in the in the greater Greenville area but additionally what what's hard to find numbers on but what I know is true from from my own experience and from people that I'm talking to in the industry is how many transactions that may not be 100% cash are 20% cash 20% down payment people trying to avoid PMI people trying not to to take on too much debt people are waving their appraisal contingencies for instance when they're getting into these bidding wars because they have the cash to make up the difference if the appraisal comes in low they're saying okay we'll bring that extra 10,000 that extra 20,000 to closing we want this house we're willing to pay more we're willing to pay more than it appraises for because we want this house you might say that's crazy that's insane why would I pay more than a house is worth well there it's actually not as insane as you might think and here's why when you purchase a house for more than it's worth and you're able to bring the cash to make up the difference to bridge the gap between the appraisal and and what you're under contract for you have now reset the market let's say that you buy a house for $150 a square foot in a neighborhood that typically sells for $130 a square foot if you're if you're from out of out of state and you're listening to this those numbers might sound insane but in in a lot of parts of of Greenville County $130 a square foot is a a decent number to be completely honest so I know in a lot of the country you know people are talking about $5 $600 a square foot we're not that market yet all right just FYI just FYI we do have some places where 300 a square foot isn't uncommon but that's typically on the the higher end of the spectrfor the Greenville Market all right so let's say that you buy a house for $20 a square foot more or you're under contract for $20 a square foot more than the average house in that that neighborhood it appraises for 130 a squ foot you're under contract for 150 a square foot you say okay I am going to make up the difference there and pay what out of pocket what I need to in order to bridge the gap well guess what after you close when the next house that comes on the market in that area gets appraised guess what the first appraisal is that that sorry the first comp that that appraiser is going to look at they're going to be looking at your comp you just reset the market at $150 a sare foot so yes you overpaid temporarily and this is again you've got to you've got to look at it from a long-term perspective that if you're if you're looking to potentially sell within a year or something like that that would not be a good move to make but if you are if you are playing a more long-term strategy you just reset the market for good you just increase the home values in the entire area if that's a subdivision in particular and there are a lot of comps you just gave everyone in your neighborhood an extra $20 per square foot value yay you give yourself a little round of applause your neighbors should be taking you out you know popping some champagne making you a a rock star in that neighborhood because you just helped everyone and so in the long term really and and again you have to be I'm not recommending that you be careless with your money but in the long term it usually works out because that value doesn't just go away the fact that you that you overpaid for your house you end up helping yourself in the long run because that gives the appraisals the data they that they need that tells sorry that gives the appraisers the data that they need that tells the appraisers okay there is a market out here for a home up to this price and it's a cash Market in fact what we're seeing and this does feel a little a little 2006 2007 is but again it's different it's different and let me back up for a second 2006 2007 there are a lot of very loose appraisals happening all right and sometimes appraisals weren't happening etc etc automated appraisals that aren't accurate were being done a lot of things like that happened back then and and that was part of what fed into the housing market crash well we're seeing some of that now today but the difference is that banks are only doing it when people are bringing a lot of money down when they're bringing 25 30% down then the banks are like okay we're fine with with waving the appraisal in this instance and and so that I think is a really good thing because the banks are recognizing okay the cash is really at the end of the day cash is King right cash ultimately determines what the market value is a people are are willing to put a bunch of skin in the game that tells you that a house is worth what they're paying for it versus people that are just again trying to get a house with as little bit down and kind of day trading with the market that's what we don't want to see and so as you're looking at what is going on and as you're trying to assess what you should do in this market if you're a buyer or if you're a as well these things really come into play so let's just again let's talk about the appraisal one of the biggest things that buyers and sellers both need to be considering is the appraisal contingency I just had a situation where this came up where a listing agent really just did not get how appraisals work I was asking her you know hey do you think that that this house that you've listed do you think it will appraise it's a house that was built last year for sold for less than 210,000 and this person had it listed for 255,000 and was getting multiple offers and I was just curious you know how she was taking it if I wanted to feel her out if she was only looking for offers that didn't have an appraisal contingency or what she thought and she was like oh no there really aren't any comps for this house we had to go into another area in order to find comps and it's not going to have any problem appraising well guess what I looked at a bunch of comps that Builder had built a bunch of homes right on that same street and they all sold for around 210,000 and she had hers listed a year later for 255,000 she ended up accepting an offer that I don't know if it had an appraisal contingency or not but if it does it is not going to appraise it's not going to appraise so I hope for her sake that she either didn't have the appraisal contingency on whatever offer they accepted even though she didn't seem to understand why that why that mattered or that the buyer is able to bridge the gap between again what it appraises for and what they have under contract for because I know that house went under contract for more than it was listed for in the end so as a seller you need to be looking at not just the number right that is on the offer but that appraisal contingency is really starting to become a big factor and I'm starting to see now even some listings which I think that this is a little absurd but some listings are saying that they won't even look at offers without an appraisal contingency with without the appraisal contingency being removed I should say they won't look at offers if they have an appraisal contingency let me say it that way they want no appraisals well guess what in in South Carolina the law is that a realtor has to present an offer to the seller to their seller client so it you can say oh we're not going to you know look at any offers that have this contingency on it oh no you you have to you have to look at those offers but more to the point that's just kind of a turnoff to me if I'm looking at a listing and the seller saying it needs to be this it needs to be no appraisal contingency it needs to be as is it needs to be this it needs to that in a lot of situations that just sounds like a seller that is just going to be overly demanding so I don't recommend putting all of that out there I just recommend again me as a realtor I communicate with people as as they are as they're talking to me as Realtors are calling me or as people are calling me interested in my listings I'm talking to them and explaining to them okay here is what we're thinking here is how we got the the value of the home etc etc here's how we came up with that but obviously if you don't have an appraisal contingency that makes your offer a lot stronger so I recommend that that you don't have an appraisal contingency some people they can't do that but in a multiple offer type of of situation that's not an unreasonable thing to ask for I just wouldn't put that out there in the listing itself as a buyer again again that's a great tool in your toolbox if you can afford it again if you're only putting 5% down or 3 and a half% down or 3% down which is about the lowest we do have some USDA rural areas that that do allow 0% down of course VA loans allow for that as well anyway you get the point there are some low down payment options if you're doing a low down payment option and you don't have the money to bring more more down you you have to go with an appraisal contingency you you don't have a choice there but if you have extra money just kind of lying around or you're bringing a lot to closing or you're paying all cash waving the appraisal contingency should assuming the listing agent understands it and and when I have clients that are waving their appraisal contingency I make sure that listing agent when you know or or if I'm representing a seller and we receive offers that don't have an appraisal contingency I'm making sure the relevant people understand how important that is that is a great tool in your toolbox that should help you whether you're a buyer making that offer whether you're a seller accepting an offer that increases the strength of of the offer dramatically if I'm personally selling a property and I get a full price cash offer with no no appraisal contingency and another one that's you know 15 20,000 above list price but it's not all cash you know it's based on financing contingent on financing contingent on appraisal etc etc I'm sorry but give me the all cash offer like that's way way more attractive to me as a as a seller than the one contingent on financing appraisal and all that long story short that's the strategy that helps you today that's how to make it all practical but in the end I don't see this Market being like 2006 2007 another way that I've seen it it change is how Builders are are addressing this Builders have really crack down and part of this is because cost of construction has gone up but Builders are really starting to to pump the brakes on new construction they're not just putting up homes anywhere and everywhere and just you know selling them instantly they're taking it conservatively a lot of Builders have said we're not taking new contracts for a period of time maybe they open that up for a few weeks and then close it back again and so we're seeing honestly Builders being way more conservative than they were back then which back then it was like developers were coming in we just buying up everything and were just put throwing up homes and we're just selling them and then when again when the bubble burst the a lot of Builders went out of business and a lot of developers got in in big trouble and you had some of these neighborhoods that were partially finished and the people that had bought in the neighborhoods ended up really getting hurt because the rest of the neighborhood didn't get finished and then some of their neighbors got foreclosed on and then that dragged down the value of everyone else we're not seeing that happen in this market it's different I I'm much more optimistic about the direction of where this Market is going now I do hope it slows down right this has been very difficult for my buyer clients having to do a ton of work right now showing houses going all over the place for for my buyer clients right now so we hope that it does correct a little bit but I don't think it's going to correct like it did in 2008 2009 where we saw the entire Market go into recession the entire economy the the global economy went into recession we're not seeing that but understanding what's happening again can help you as a buyer or as a seller be more informed with how to approach buying and selling with how to approach what you're doing on on your real estate transactions if you have any questions about that let me know my contact information is in the show notes I appreciate you guys listening I appreciate it even more if if you leave a rating or review if you hit the Subscribe hit the download button all those things are great for this show but until next time I hope you guys stay safe let's buy and sell some houses together [Music]