Despite what looks to be a tough economic picture in the year ahead, buyers look to be gearing up for a busy buying season in 2021. So far, we do not see huge price drops across the board, and hopeful buyers are advised not to hold out for fire-sale prices. Nevertheless, prices are falling steadily as sellers adjust to the new reality. Any buyer looking to take full advantage of this will want to know how to spot a motivated seller. We’ve touched on this previously, but now we’ll be taking a closer look into the specific types of motivated sellers.
These are the ones to keep an eye out for as you navigate the NYC real estate market. For some, their motivating factor could mean you have a chance of getting a home at under market value. For others, the thing to push for in negotiations might be buyer contingencies. Either way, buyers should work closely with their agents to determine what motivates the sale and what you stand to gain from it.
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Property Owners Under Threat of ForeclosureProperty Owners Under Threat of Foreclosure
While the foreclosures level is nowhere near what it was in the wake of the Great Recession, financial difficulties due to the pandemic have still pushed many New Yorkers into this unpleasant corner. According to a new report by ATTOM Data Solutions, New York was among the markets with the highest foreclosure actions during November 2020. Nationwide, the number of foreclosures went down this month, suggesting things are particularly difficult right now in major urban areas.
Buyers looking to snag a deal are advised to work with their agent to identify any pre-foreclosures or short sales. This is when a homeowner cannot pay their mortgage and is very close to being foreclosed on. To save their credit, these homeowners will aim to sell their home if their bank agrees to forgive the remaining mortgage owed. This makes them very eager to close with all haste, a situation that puts any buyer in a powerful position to dictate favorable terms.
Banks in Possession of REO’sBanks in Possession of REO’s
Another approach to scooping up a bargain is finding homes that have already been foreclosed on. After a foreclosure, the home will typically go to auction, sold to the highest bidder. But if it doesn’t sell at auction, then the lender (usually a bank) must keep possession of the property. This is something no bank or lender wants as it means possession of a depreciating asset. Unwatched homes like this are at an increased risk of vandalism, making them even more of a liability. If you can find an REO property that’s still in good condition, then the lender will usually be prepared to negotiate well below the original starting price at auction.
A Person with a Recent Job LossA Person with a Recent Job Loss
The pandemic has led to a record number of job losses that have impacted New Yorkers across the five boroughs. For homeowners who have lost their job unexpectedly, there are usually only two options available to them. They can try to find a lower income job as a temporary substitute or hold out for one with comparable pay as their old job. Either way, their income is sure to take a hit and make it more difficult for them to keep up with their mortgage payments and property taxes. Their only recourse is usually to sell and find a less expensive home. These types of motivated sellers are often in a rush to sell and willing to come down considerably on price.
People Who are Transferring JobsPeople Who are Transferring Jobs
Similarly, those who’ve lost their job may be starting a new one in a different town or state. This means they’ll have to quickly sell their home and move before their new job begins. In this situation, sellers won’t be in much of a position to haggle over price or wait for the right buyer to come along. Instead, their main goal will be to get the transaction over with as soon as possible to begin their new life.
A Couple Facing Divorce or SeparationA Couple Facing Divorce or Separation
Divorces are always messy, with the biggest fight being over the division of assets. The largest of these assets is usually the home. In most cases, the person who gets the home will quickly try to sell before their former partner can renegotiate the assets. Other times, both partners will agree to sell the home jointly and split the proceeds evenly. In these situations, the sellers may be disorganized and have little communication with each other. All of this makes for a superb opportunity to snag a deal. They may accept any terms given so long as it means an end to the deal in their rush to close quickly.
Retiring InvestorsRetiring Investors
Some aging investors choose to cash out and retire from the investing game. There can be a host of reasons for this. Some have rental properties that they’ve self-managed for years and can no longer keep up with. Others want out so they can pursue other goals like moving abroad or starting a new business. Others still may see this as an opportune time to sell while buyers have access to low-interest rates and loans.
Whatever the reasons, home buyers and beginner investors should look out for these types of sellers. They should also work closely with their agents to determine the seller’s exact motivations for cashing out. Figuring this out can give you important indications on what to push for in negotiations.
Failed InvestorsFailed Investors
For every successful investor, there are dozens more who rushed in before educating themselves first. Maybe they got swept up by the allure of flipping houses and bought before realizing just how much work it takes. Perhaps they were just unlucky and made a bad purchase at the wrong time. Now they’re either stuck in the rehab process, can’t raise more capital, or have just had enough with the whole rat race. In any case, they want out and are usually prepared to take a loss to do so.
When a homeowner passes away, their assets are usually passed down to their heirs through the will. The home will typically be the main asset. Many heirs may not be able to afford to move into the home, especially if it comes with high property taxes or common charges. In the case of multiple heirs, selling is usually the preferred option. The potential infighting between the sellers and questions about the property’s condition provides many advantages for patient buyers.
Sellers of an Old Property that Needs UpdatingSellers of an Old Property that Needs Updating
Homeowners who are strapped for cash and sitting on an old property will be in a difficult position to compete with newer properties on the market. These older homes are likely to have problems that make them unappealing for most buyers. Depending on how bad the property’s condition is, these homes can be a great opportunity for a deal.
Just make sure there aren’t any permanent structural issues with the property and have a thorough home inspection done. This means calling in additional experts besides the home inspector to take a closer look at the bones of the home. Buying an ‘as-is’ home like this poses many risks, so be sure you know what those are before closing.
Family’s that are Expecting a BabyFamily’s that are Expecting a Baby
NYC apartments aren’t exactly known for being spacious, and nothing makes them feel smaller, quite like a new addition to the family. A new pregnancy, especially an unexpected one, usually means selling and finding a larger home. This puts the homeowners under a lot of pressure to sell and find a new place before the baby arrives. In this time, the expecting parents will be busy reading baby books, attending doctors’ appointments, and seeing to a million other things that must be done before the big day. Through all this, they may have a difficult time focusing on the home selling process.
For savvy buyers who can identify these types of sellers, they present a golden opportunity to close on a home below market value. But even if they are focused and determined to get a certain price, they’re likely also juggling a home purchase at the same time. Chances are, they need the proceeds from the sale before they can close on their new home. This makes the closing process even more time-sensitive, putting the buyer in a strong position to demand contingencies.