Sellers get creative in difficult market
Real Estate News From The We Buy Homes Team
While new appliances or a carpet allowance are sometimes used to entice home buyers, a pricier perk was on display in Loudon County last weekend, where a builder offered a free golf membership to visitors who bought a cottage home during an open house at the new residential-golf community. Besides covering a $30,000 initiation fee, the incentive also covered the golf club’s $385-a-month dues through April 2009.
Broker Troy Stavros said two or three people expressed interest in the homes and were going to return this week. The goal of the incentive, he said, was “to kind of help people make that decision to go ahead and buy something.”
All over East Tennessee, builders and home sellers are wrestling with the same problem - how to persuade people to “go ahead and buy something” and, if that doesn’t work, deciding what to do as an alternative.
For Knoxville real estate investor Kenny Lockhart, the new market dynamics have forced him to scale back his expectations. Lockhart, who previously worked as a forester for a sawmill, has been investing in real estate for 10 years but jumped into the business full-time about 18 months ago. He currently owns a dozen homes, including nine rentals.
Lockhart said his strategy is to buy homes, fix them up and sell them, but right now “you can’t sell a house.”
“People are afraid to spend their money right now,” he said, adding that it’s also more difficult to get a mortgage than it used to be.
Lockhart said he recently sold a home on Ball Camp Pike for $111,000, after buying it for $80,000 and investing more than $20,000 in repairs.
“I could have held on to it until next year and probably made $20,000 more,” he said. “But I needed my money now.”
Still a local market
In many ways the national economic slump has been driven by real estate woes. When credit was plentiful, many buyers bought homes they couldn’t afford, often with the help of adjustable-rate loans or loans that required no down payment. In an environment of rising home prices, buyers who bit off more than they could chew could always sell their homes and pay off the debt.
But when prices began to fall, the effect was devastating for some buyers who suddenly owed more than their home was worth. A wave of foreclosures and bad loans prompted huge losses at banks across the country, and to a tightening of credit markets.
But while the local real estate market has been sluggish, there’s no doubt that East Tennessee has been spared from the worst of the pain. According to data from the National Association of Realtors, the median sale price of existing single-family homes in Knoxville fell by 2.7 percent in the first quarter, compared to a national drop of 7.7 percent. Knoxville also outperformed Volunteer State peers like Memphis, where prices were off by 18.5 percent, and Chattanooga, where prices were down by 3.4 percent. Figures were not available for Nashville.
Few markets have been hit as hard as Florida, as Athens, Tenn., resident Annette Stephens can attest.
Since her brother had a stroke, Stephens has been trying to help him sell a Florida home. Stephens said the Sarasota County home was initially listed at $299,000 but the price has since been slashed to $179,000 and the family is now offering - in newspaper classified ads and on eBay - to trade it for a home in Tennessee.
Stephens said the offer has succeeded in generating interest, including queries from people who offer exotic cars or mobile homes to swap.
“There is still at least a market (for homes) up here,” Stephens said. “Down there there’s just almost nothing … thousands of homes for sale. It’s unbelievable what’s happened in Florida. It was so overbuilt and overpriced and with the economy, people just aren’t going.”
Waiting to see
On the other hand, Knoxville sellers are definitely playing a waiting game. According to the Knoxville Area Association of Realtors, East Tennessee home and condo sales were down 22 percent in the second quarter of 2008 compared to the same time last year, and the average market time had jumped from 88 days to 99 days.
Evi Taylor is seeing that waiting game first-hand. Taylor is trying to sell her family’s home in Farragut because her husband, former University of Tennessee assistant football coach Trooper Taylor, accepted a job in Oklahoma.
Evi Taylor said they listed the home with a Realtor in January, but when that contract expired they decided to drop the price by approximately $40,000 and try to sell it themselves.
One problem, Taylor said, is that buyers have shown interest but haven’t been able to sell their own homes. While the family has gotten calls about leasing the home, Taylor said they don’t want to do that, although they might consider a lease-purchase arrangement.
Taylor cited the high price of gasoline, adding that “I think everybody’s just waiting to see what’s going to happen with the economy before they make big purchases.”