Hello everyone and Welcome to another episode of Selling Greenville your favorite real estate podcast here in the upstate of South Carolina I'm your host Stan McCune as always realtor here in the greater Greenville area and you can find all of my contact information as always in the show notes that is where my phone number my email address really those two things primarily are there for you to be able to contact me but you can also contact me by direct messages on various apps that are out there you guys can find me I'm all over the Internet like every realtor out in the world you won't have any problem reaching out to me so feel free to go ahead and do that and as I always ask you guys please rate review subscribe do the things that need to be done in order to make sure that you don't miss any future episodes and so that you promote this show to other people that might be searching for a Greenville related podcast I appreciate when you guys take the time to go ahead and do that and to hit that five star rating and to leave a short little review I don't ask for much but I do ask for that so please go ahead and do that if you have a moment we're going to be talking about today and I just had a little New Jersey accent moment there for a second we're going to be talking we're going to be talking talking today about the the spring real estate season that we're entering into and this is what happens every year this time of year we have things kind of take off during the Spring that is a normal cyclical part of the market and and it generally works like this there is a slow buildup January February March and then usually things kind of get nutty in April and then really nutty in May and then that continues in June and then we see a little dip in July as people go on vacation all that kind of stuff and then a little push little end of season push in August and then things start to Trail off as the rest of the year goes on until we go back to January and then it starts all over again that is the normal cycle of the real estate market at least here in Greenville I imagine it's probably Nationwide for the most part as well but last year it it was interesting because we thought things were were really crazy in the the first quarter of the year and they were I mean to be completely honest the first quarter of last year was really crazy but when April really towards the end of April and then into may we realized we were in something that was unlike any other Market that we had ever experienced that was when we started to see some of these insane price increases year on year that's when we started to see month supply of inventory drop to levels that we didn't even think were possible that was when we for the first time started to see the percentage of contract price or the percentage of sales price to list price start to get to 100% or higher when traditionally it had always been you know people always sold their home for less than it was listed for starting in April last year that was when that Trend happened of it not being uncommon for sellers to get on average and and again there's always been times where sellers have gotten more than what the home is listed for but in April last year was when the average became that sellers got at or above what they had home listed for so things went really crazy last April but there are so many different things that make the market right now just unpredictable we've talked about this of course but we still have all of the the things baked in that would assume that this would be a normal spring season but also not a normal spring season so so we still have the the very low Supply right we've talked about this a lot still very low Supply causing prices to go up dramatically but there are some indicators that Supply may increase a bit in upcoming months I'm not going to get into the Weeds on this the building permits are up there are some indicators that some supply chain related things are improving although some are worsening so that may all balance itself out but anyway long story short is there may be a little bit of an increase in Supply I don't think it's going to turn the dial that much but we have to see we just don't know obviously we've talked about mortgage rates have gone up at a crazy unprecedented rate or at least unprecedented in recent times and they're still quite low historically but when they when they shoot up so quickly that obviously causes a System Shock to the market now we haven't seen that System Shock yet but will we that's a question and that's a question that I have and that we'll discuss here in a moment at the end of the day we have a lot of stuff being stirred around in a cauldron and we don't exactly know what soup is going to come out of it what real estate soup is going to come out of it as we enter the busy spring real estate spring and summer real estate season and here's another little interesting tidbit so I read an article yesterday on Bloomberg that was talking about the the mortgage increases that we've that we've talked about a bit the the the mortgage interest rate increases and it was pointing out that this will cause a little bit of a Slowdown in buyer demand in theory but where it's having the most impact is in those already very expensive areas like San Diego for instance like San Francisco like New York City those are the areas that are being disproportionately impacted by the interest rates going up and the the person that wrote this article kind of alluded to that the mortgage rates going up will push more people out of those areas into the cheaper areas like the boy the Idaho of the world well Greenville as we all know is one of those markets that people have been pushed to as they've been pushed out of these more expensive areas or maybe not even pushed out of these expensive areas as they just want to move out of the you know these areas that tax everyone that have been very restrictive with covid whatever the case may be people have their own motivations I've heard them all but the bottom line is we have a lot of people moving to Greenville from these more expensive areas and what's happening on the national level with the FED trying to curb inflation which is then in turn driving up mortgage rates could end end up actually furthering that and pushing more people out of those expensive markets and into markets like Greenville so again that's something that we'll have to continue to track so all of that to say there is all sorts of Uncertain uncertainty we don't know exactly what's going to happen but I think we can make a few reasonable predictions I have seven predictions here and again these predictions are Greenville specific if you're listening to this from another Market I wouldn't necessarily say that that these things would apply perhaps some of them do but anytime I talk about real estate on here because I'm not looking at it from a national perspective it is coming through a Greenville lens even when it's a broader topic like this all right so what's my first prediction I think that we will see an increase in contracts falling through due to mortgage rates increasing so quickly a lot of people will get preapproved and then particularly in this market after well the amount of time that it takes to actually get a house under contract it it might take weeks it might take months and during that time if they have not gone back to the lender or if their agent has not gone back to the lender and been like hey you know we originally set the top price point the top price for our budget at 300,000 but that was when interest rates were 3 and a half% now that they're at five 5 a 12% can we still afford 300,000 that's a very important question and for those that just have that that two-month-old preapproval letter and they they send that you know that's usually a requirement when you send an offer you've got to send your pre-approval letter in they send that in if the listing agent doesn't then vet out that preapproval letter to double check that the buyer can actually perform can actually purchase the house now that rates have gone up it's likely that we will see contracts falling through because of that because I I can tell you right now a lot of listing agents they don't double check those letters they're they're not calling the lenders to check on things they they just see it they just assume it's good and then move on for me I double check those when I'm the listing agent I want to make sure that the buyer is good to go that there's not been particularly now in this environment that there's not been any major changes that would cause them to not be able to buy the house and as a buyer agent I do something similar in this type of an environment had a client recently that wanted to put an offer on a house and I was just like okay I need to check with the lender to make sure you can still afford this because it was at the top price the top price point for their budget and and that and they got pre-approved when mortgage rates were a lot lower and so I went out of my way because I don't want them to get under contract and have that fall through that's heartbreaking for everyone nobody wins in that situation it's a lot of work on top of of all the Heartbreak and so I went out of my way to make sure that they were pre-approved at that price point with the current environment for mortgage rates so those that haven't gone through all of that there's a very good likelihood that they will start to see contracts fall through because of that and and I think honestly we may have already seen this I I have seen quite a few fall through and you know the listing agent they always say this but they say you know it fell through no fault of of the seller they always say that so it's hard to to be sure that that's accurate but most of the time when that happens it's because of the buyer financing I think that that will continue my second prediction I well I should say I think it will continue and increase I I think we might see a major increase of contracts falling through here in the spring so that's something to monitor number two lots of homes I believe are going to be listed way overpriced and what we're going to see is that price decreases which we really haven't seen much the past year we haven't seen a lot of times where a home has been listed and then has had to reduce its price but I think we will see price reductions really increase during the Spring season because people are going to be listing their homes thinking okay it's a hot Market I know this home normally would only be worth 350 but let's just list it for 400 and what's going to happen is they're going to overplay their hand there's going to be a lot of people that overplay their hand and that end up having to decrease and and reduce the price on their home and and then what's going to happen is you're going to have some people you know your friends are going to tell you oh the market is shifting you're going to hear some realtor say oh the market is Shifting because we had to reduce the price on this home and it's like that that could be true if there's more to it than just this Dynamic that I'm explaining but when someone overprices their home and then has to reduce the price that doesn't say anything about the market that just says that you had a poor marketing strategy for your home you should never overprice your home in this market you can get away with it a little bit more than in other markets but it's still not a good idea number three I think we're going to see and and we're already seeing this but I think we're going to see even more of people saying that they're selling a home as is and that will be because of people really it's it's a lot of people just not wanting to have to to mess around with repairs they want to just get under contract and just okay it's smooth sailing we're focusing on moving or or or whatever the case may be so that they don't have to focus on getting contractors out there and doing all sorts of repairs etc etc I think we're going to we're we're already seeing that I think we're going to see that increase more and more people wanting to sell their home as is because they can and this is also has also been a big Trend recently in the past if you inherited a home for instance or if you were an elderly person and you were trying to to move out of your home whatever the case may a home that was livable but needed a lot of cosmetic work wouldn't be listed in that condition right the elderly person doing that they might have their family or their Church come over and try to help them spruce up the house get it ready to sell whatever the case may be those that inherited a home from deceased parents they would flip the house and and then put it on the market that Dynamic has really changed and I think that will continue to change we're seeing a ton of houses and I think this will continue homes that are being sold as is that are really cosmetic fixer uppers but they are livable and so they're technically able to get financing but man they've got that old Shaggy carpet from 50 years ago and baseboard heat and you know all these quirky you know quirky things some you know damage to the cabinets all these different things you know Hardwood Woods are scratched up but technically it does qualify for financing because it is livable and so people are are listing these and then just saying as as is you can do it whatever do to it whatever you want to do to it but we're not replacing carpet and buffing you know refinishing the floors and replacing the the Cabinetry you got to do that yourself I think that that Trend which has already started I think will and will pick up number four I think that we'll see flippers and small Builders increasingly taking risk on cheap homes in traditionally undesirable locations what I mean by that is you know because of how housing affordability has has kind of Tanked in the Greenville area at least by local metrics now we're seeing the average or the median home price be around the $300,000 price point well that's that's a big increase from when it was in the low 200s not that long ago so what that means is that now there's an opportunity some of some of the best opportunities for people flipping homes and you know building cheap new construction is to find those transitional areas those places that people traditionally would have avoided and they can have a nice home flip a house build you know a a small but nice cheap H cheap home and whereas in the past people would have been like wow that's a really nice home but I ain't moving there because I don't like that area now they just don't have any other options and so and flippers don't have a whole lot of options in terms of of what they can purchase there's not a ton of opportunities out there and so this is kind of a marriage between the flippers who these are going to be the only homes that they're going to be able to buy are in areas that traditionally you wouldn't flip homes in and then the buyers they're going to be forced because there's just nothing else available that they can that they can get they're going to be forced to have to to purchase a home like that or to try to get into a bidding war for for one of these other homes that need a lot of work and so I think that that's the trend I that I have not really seen a whole lot I've seen a little bit but I think that that is has the potential to really take off this year number five I think we're going to see a a big increase in firsttime home buyers that have been looking for the few months just drop out and I think that that's going to be have a lot to do with the the mortgage rates that we've talked about I think that as a lot more homes come on the market but a lot more buyers also enter the market the the new buyers entering the market are going to be energetic right they're going to be excited when you first start your home search you're excited you're pumped you're ready let's make some offers and and then you're you've got this influx of new listings coming on the market because it's the busy season right so here's what happens you've got the people that have been looking for like two three four months they're already tired right they've already got buer fatigue they're they're ready to drop out and now you've got this influx of listings so it's like okay well we have some some potential here and so now whereas in the past they were maybe only looking at a handful of homes per week now they have an opportunity to look at a bunch of homes and so they they start it gives them a little bit you know a little bit of excitement a little bit of that you know okay maybe we can actually do something here and then they start looking at those homes and putting in all that time and energy taking off work or or doing it after work or whatever the case may be and then submitting offers and then finding that they're going up against this even more energetic group that just entered the market and that is really aggressive because they're scared about mortgage rates going up they've heard they've been tracking this very closely they've heard what's happening and they want to get a house under contract right away and then those buyers that have been looking for months and months they just get completely Fed Up and exhausted and they drop out I think that that is going to happen and and it's sad when that happens because that's again everyone loses in that situation me as a realtor you know if I have clients that I've shown a bunch of homes to over the course of a really long period of time and then they drop out that's just a sunk cost for me and it's a sunk cost for the for the buyer as well so again nobody wins in that situation but unfortunately I think that we're going to see that really happen here in the spring season number six I think we're going to see an increase in quote unquote second waves for homes that aren't as nice as the other homes coming on the market and as a result don't sell in the first few days here's what I mean by second waves so think about it from a buyer perspective let's say that you're targeting a certain area let's say that you're targeting East Side Greenville and between Wednesday and Friday five homes that Loosely fit your criteria come on the market in East Side Greenville you're going to to look at that and be like okay all five of these have potential but here's the one I want the most here's kind of the next up and so forth and so on right well guess what everyone else looking at these homes is probably going to be thinking about them in similar ways at the end of the day they're probably all going to be like okay this home is clearly the nicest and clearly the best value and then this this home is next and maybe there there's some differing opinions on on what's in third or fourth or fifth place but probably most people are going to have consensus on the nicest and the second nicest home so guess what everyone is going to be making offers on those homes and and kind of not paying attention to the others okay so how does that play out traditionally how that traditionally plays out is that once those top two homes go under contract then everyone starts to focus on homes that were in third fourth and fifth place and so what the result is is there's a second wave of showings and sometimes I have run into this in these situations in the past after home's been on the market for a week or two there can be multiple offers that happen just just randomly because everyone after the inventory situation resolved itself the the people in other words everything else went under contract the people the buyers that were left now all focus on that one house and now we've got after bidding wars on all the other four homes now we've got a bidding war several weeks later on on a house that had listed at the same time as those others I think we will see an increase in these second waves occurring with homes because of of how many homes now will be coming on the market and but how many buyers will end up getting the short end of the stick and not being able to to get their preferred homes under contract and number seven we talked about this in the past and we're going to talk about this in the future I actually have training on this later this week but the South Carolina Association realtor contract which is the contract that the vast majority of residential real estate transactions occur on utilize the the contract that we call scr 390 form 390 it's changing how it handles repairs they're completely eliminating the the main section that talked about inspections and repairs and it's switching over to a due diligence only contract I've discussed this a little bit in the past and like I said I'm going to discuss it again in the future so I'm not going to get into the Weeds on it but I will say this the short version is that there's going to be like never before in the green Market non-refundable money required by buyers non-refundable not the not the standard we have gotten used to for years and years that pretty much buyers are guaranteed unless they completely default on a contract they're almost guaranteed to get their earnest money back because the ball is in their court that is about to change and and we will talk about that more later but the result the end result of that is that those who are cash poor those who have $110,000 in the bank for instance for them to have to risk potentially 10 to 20% of that is going to be incredibly incredibly risky obviously and it's going to put Power in the hands of those that have more money in the bank less cash concerns and so I think that that's something that that we're going to see is that those that are cash poor are going to find themselves when this change happens is going to happen in mid June so we're less than two months away when it happens those first-time home buyers or people that are cash poor are going to find themselves in a real bind and the people that have money and are willing to risk it they are going to to be in a real position to succeed in the Market at that point so practically speaking so those are my seven predictions but practically speaking what does all this mean what what does this mean if you're a buyer or a seller in this market I have a few practical thoughts first off I think that backup offers can be even more beneficial than in the past we've talked about this before a backup offer some people confuse backup offers they think in a multiple offer situation that if if one person has submitted an offer that you can then be a backup offer no that's not what we're talking about with backup offers backup offer is when a contract an offer has been accepted and a house is under contract but someone else submits a backup offer that then if the seller accepts it that offer automatically becomes the primary contract if the primary contract falls through well I've already said there is a pretty good chance that we see an increase in contracts falling through due to the the way mortgage rates are and and all the Dynamics there and as a result I think they're could be an opportunity for for buyers to get homes non-traditionally by means of the backup offer process and that's something I've helped multiple clients over the years secure homes by means of backup offers so there's a narrow number of homes under contract that I feel like are are quality options for submitting backup offers but that's something that is an important tool to keep in your back pocket and something that for certain homes it could end up getting getting you in when otherwise you couldn't otherwise you were just going to get out bid another practical point I think that buyers and buyer agent that identify second wave candidate homes will have an opportunity to get something under contract without a bidding war in other words let's say that you see these you know five homes that that come on the market in the same area very similar in in in a lot of ways and you really like two of the homes but you see that there are three others that ju they just aren't on par with the other two but you also know that those other two have you know 15 20 offers on them someone that's Savvy might be able to pivot to one of those other three homes that aren't as desirable and might find themselves in a situation where they're able to make an offer without a bidding war and get under contract at that point and I think that if you're able to identify those homes that are candidates for second for having a second wave there's a really big opportunity there but if you wait until the second wave happens you might find yourself Just In Perpetual bidding wars because like I said everyone else is going to be looking at those properties once they're in the second wave another point I think homes and I discussed this briefly earlier but homes that are overpriced haven't been penalized in this market as heavily as in the past but that being said I think there could be opportunities for buyers to get something under contract without a bidding war and maybe even get the price lower than it should be by targeting home homes that have been on the market a while and I would say that's mostly mostly homes that are over that 300,000 maybe even over $350,000 price point are the are the main ones that I have in mind when I'm saying that um but basically if you can keep track of homes that have been on the market for a while and this is something that I look at occasionally I'll I'll you know if I have clients that have just been struggling to find something or get something under contract then I will you know take some time okay what has just been languishing on the market and sometimes there are opportunities there to get something under contract and and perhaps even for a lower price because it was just overpriced from the get-go from a seller perspective I I think an important distinction that sellers need to understand is they need to know the difference between a second wve property and an overpriced one an overpriced property so a second w property and overpriced property both don't get a lot of activity but it's for very different reasons the second wave property doesn't get a lot of activity because it's it's competing with other properties that are better than it that are nicer than it whereas an overpriced property doesn't get a lot of activity because it's just overpriced it's not it they it's not worth what it's listed for O overpricing A House Is is a bad idea right we we already discussed that having a second wave property you can't control that if it's just you know if your property is just not on As Nice of a street as another property like you can't there's nothing you can do about that but it's important to know the difference because if you're a seller that is freaking out that you're not getting as much activity as you thought you would but it's simply because of your competition that's a completely different scenario than freaking out over a home being overpriced you should freak out if your home is overpriced and you should hire a realtor that is willing to stand toe-to-toe with you and be honest with you about what your home is worth so that you don't overprice it that's an extremely important distinction I think as well buyers are just going to have to take more risks than they have in the past currently you know a lot of buyers are having to go the Asis route and now we're talking about buyers having to put more money on the line and listen here is the the part of this that really makes this difficult for buyers in this market is that sellers are so confident that they will just be able to relist the home and have it sell right away to someone else that they really if you lose your earnest money if you if you back out and like we're saying here in June forfeit your termination fee which is which is going to be the next thing sellers aren't going to care they're going to take that money and run why because they're going to be able to relist the home they might even get more than what you had under contract for buyers are going to have to take risk and and just come to grips with that that this is if they if you want to buy a house in this market there is only one way to do that and that is to take risks and to recognize to understand that that you're going to have to do that and so you have to make offers with conviction and and this is kind of my final point here is that first-time home buyers really need to have realistic expectations and you know they need to understand I I get a lot of questions from people that are interested in in you know making their first home purchase and their questions show that they think the market is what it was four years ago the market is not what it was four years ago it's not what it was one or two years ago it is very unique and very not buyer friendly and that's just the reality of the situation we just have to come to grips with that and buyers are are going to have to have and set realistic expectations and and then make offers with conviction you can't you know make a lukewarm offer you have to make offers with conviction and offers that you know that basically exposes you to a little bit of risk and that's just going to increase when we when the contract cont changes in June there's going to be risk and if you can't do that then if you're not financially in a situation or with regard to your headp space in a situation where you can do that then this is just not the market for you to to buy in now what is the market for you to buy in well that's a great question we who knows who knows when the market will change and what your personal financial situation will be when that happens happens but it doesn't make sense to be looking at homes and to be making offers that just aren't going to get accepted that again we've talked about things being a waste of time that's a waste of time for everyone it's demoralizing you don't need to do that so I try with all my buyer clients to right at the very beginning try to set realistic expectations if I have clients that are like Hey we're at this price point we don't know if we can get what we're wanting at this price point what I'll do is I will actually look at the past three months or so at their criteria and and see what has sold the past three months that fits their criteria and then I will just send them those listings and it's like hey do you see anything from the past three months that you're like okay for that price I think that this is the home that that I would have liked if the answer is is yes that's that's a good sign okay let's move forward if the answer is no then you're not ready to play in this market and so and and there are some other ways of figuring that out as well but that's that's a that's an exercise that I've found to be very very fruitful in the past so all of that to say I think it's going to be a crazy next few months I think it'll be a fun next few months despite all of what I said about it being difficult for buyers I still think there's going to be a lot of fun to be had in this real EST State Market even if you are a buyer as long as again as long as you have those realistic expectations but let's get out there and let's let's buy and sell some real estate together I am ready I am prepared I have been training for this moment I'm just joking kind of I'm always mentally preparing for for the next Trend to happen in real estate and and I think I can help you guys out if you need my help and so that is why to conclude my contact information is in the show notes if you need a realtor if you need to talk real estate I'm your guy and as always please rate review And subscribe to the show have a wonderful rest of the week enjoy the lovely weather outside take a walk play a little basketball outside whatever whatever you like to do pools aren't open yet but there's still a lot of fun to be had so enjoy the rest of the week stay safe and we'll talk again next next time [Music]