Working with homebuyers today is taking longer than it used to. My last sale was to a couple I had been working with for eight months. My new escrow is to a family I first met six months ago. From the time of my first meeting with a potential buyer until closing, can easily be four to five months. I have been thinking either my sales skills have rusted over the winter or this is another sign of the times.
A few years back it wasnÕt unusual to be talking with someone about buying a home and have them in an escrow in a week. The home buying, loan qualifying, inspection and appraisal process flowed as easily as the American River into Folsom Lake. It was ordained destiny. Nothing impeded the process. When a buyer wanted to be in a home in 30 days, it would happen. Brokers, lenders, appraisers and escrow were in complete harmony. My fastest closing was in 2005 to a lady from San Jose who was recently divorced and had sold her home. We met for coffee at 10 a.m., previewed five houses before noon and had an accepted all cash offer by 4 p.m. that closed eight days later. Things have changed a bit since then.
Real estate agents find themselves spending more time with buyers than we used to. One reason is the demographics have changed. More than half of all buyers today are first-time entry-level buyers. A few years ago when the average price for a home in El Dorado County was $500,000, first time buyers couldnÕt afford this county. The typical profile for county homebuyers then were mostly relocating transplants who had sold their home in another county and were bringing a bundle of cash with them. They were experienced home shoppers, understood the process and made decisions quickly.
There is a great deal of personal satisfaction in working with first-timers. They are enthusiastic about the home buying process; they donÕt have out-of-control egos and they follow directions. But they also have issues. Many have limited credit or employment history, they are usually short on savings and often have other priorities in their life, which delays their decision-making capacity. Buying a home is a series of many uphill steps requiring more commitment than browsing through pictures of homes on the Internet. Generation X (born between 1965 and 1980) move at their own pace.
Not only has the buyer profile changed but so has the level of confidence in the idea of home ownership. Most of us 75 million baby boomers (1946 Ð1964) believed owning a home was a key part of living the American Dream. Real estate was a rock solid investment that steadily appreciated 4 to 6 percent each year. Oh, there were occasionally market setbacks but property values always bounced back quickly. We believed that everyone should own a home. It was nearly a national entitlement. Both major political partiesÕ platforms enthusiastically endorsed federal efforts to increase the percentage of home ownership.
Today a growing segment of consumers is questioning those beliefs. Home ownership is like marriage and having a family isnÕt all that important. It may take years before this group gets off the sidelines and decides to buy a home and some never will. The percentage of homeownership is expected to decline from its high of 69 percent to 62 percent. Friends and relatives, who were once supportive of young couples buying a home a few years ago, often greet the news with skepticism today.
The type of properties being sold today increases the time agents are spending with their clients. Short sales are notorious. Once a buyer makes an offer on a short sale it could take months before getting a response from the lender. REOs are Òfast respondersÓ but the discounted price of an REO attracts many offers. Buyers and their agents often find themselves in a multiple offer situation and often many times on different properties. Getting an offer accepted on the right REO could take months. Buying new construction is another delay. Builders have little standing inventory available and are reluctant to start a new one until a contract is signed.
Financing also takes longer. Thirty days was pretty common to process a loan from start to finish through most of 2007. The appraisal could be finished within a week of ordering and underwriting guidelines were consistent. Today, 45 days to process and close a loan is considered warp speed. Loan guidelines are changing daily. A borrower who was pre-approved yesterday can be declined for the loan weeks into the process simply because an investor changed their guidelines. New disclosure regulations often delay ordering the appraisal and the multitude and redundancy of disclosures is confusing to borrowers.
The sheer volume of paperwork in a home sale is overwhelming. ItÕs actually surprising that anything closes. If buyers and sellers took the time required to read and understand all the documentation that agents, lenders, inspectors and escrow officers are shoving at them, nobody would ever move. IÕm not advocating going back to two-page purchase agreements but everyone read the old two-page contract. Nobody reads 10 pages of six-point type and then the 142 pages of disclosures, reports, disclaimers, instructions and addenda. The irony is that the more information is provided, the less it is understood. In order to manage the flow of documents, real estate agents and companies hire full time transaction coordinators who monitor the endless flow of recycled trees.
Traditionally, customer calls would turn into sales within weeks. Today, many of my new contacts wonÕt be in escrow until 2011. IÕm betting I will be around.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his Website www.kencalhoon.com.