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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
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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
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until next time I hope you guys stay
safe let's buy and sell some houses
together
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