DuPage Real Estate

…the answers to those two questions help to explain the BIG differences between purchasing a foreclosed property or a short sale property.  If you don’t own something you can’t sell it … and with real estate, owning and selling generally speaks to holding clear title that is able to be transferred.

Laws in the USA seriously support home ownership and the homeowner … even when there is a mortgage that is not being paid/honored.  Laws vary but generally provide for a process whereby the mortgage holder/bank can petition to take over title to the property due to a default by the homeowner.  This foreclosure process can easily extend for a year or more, and during this process the title for the property belongs to the homeowner.

Who can sell?  Bank can’t until the foreclosure process is complete and they hold title. Until then, only the homeowner can but must pay off mortgage at the time of sale … or they can petition the bank to cooperate in a short sale.

As a licensed real estate professional I have been bombarded with information about short sales and foreclosures in the marketplace!  I was recently reminded that the buyers I work with may not know all they need to know about the differences, and why should they?That’s my job — to remain informed, to understand client needs and to provide them with information necessary to make their best decisions.  So, know that both short sale listings and foreclosed property listings provide bargains in this marketplace (and because of the volume of both, ‘traditional’ home sale prices have been pulled downward and provide bargains as well)!

But bargain is all that short sales and foreclosures have in common.  From a practical standpoint the needs of a buyer will usually steer them to one or the other, mainly due to timing aspects.  And the timing aspects have to do with the simple question of who holds the title to the property?  That determines who has the right to sell the property.  Tune in again … I’ll write more about foreclosures and short sales.

At any given time the real estate marketplace can be measured based on its balance or imbalance with respect to supply and demand.  In theory a true balance is not possible to sustain, there will always be some imbalance.  However, as the imbalance becomes bigger and bigger and the consequences of that imbalance become bigger and bigger as well … then it qualifies for a name.  When there are many fewer homes listed than there are buyers for those homes (imbalance), it is often referred to as a ‘Seller’s Market’.  Why? Because the Sellers are at an advantage!  Why?  Because they have a rare commodity for sale, an excess of Buyers in the marketplace looking to buy, and few listings in inventory as competition!

What are the ramifications?  Well, there are many, but likely the most important with respect to this discussion is how it affects prices.  In a marketplace with all other things remaining unchanged, when the supply goes down the prices go up!  Why?  With fewer homes and buyers wanting and/or needing to buy from a short supply, the buyers will be willing or forced to pay more in order to win the prize.

When a real estate market is balanced it means there is a supply that is equal to the demand.  That means that there are precisely the same number of buyers as there are sellers (listings).  When a real estate market is imbalanced (not in balance), it means there are either more sellers than buyers (greater supply), or there are more buyers than sellers (greater demand).

Have you heard of a real estate marker being referred to as a ‘buyer’s market’  or a ‘seller’s market’ ?  That refers to an imbalance of supply and demand!  Does that affect prices? YES!  I’ll next discuss each…

Located in the heart of Dupage County Illinois, Glen Ellyn is a small village reminiscent of yester-year.  It’s a great place to live and work and raise a family.  Take a look…  http://money.cnn.com/magazines/moneymag/bplive/2011/snapshots/PL1729756.html …and contact me if you want to learn more!

Now is when things can get more interesting in the forecasting, because there are so many, many ways things can get out of balance …  For instance, one more buyer added to the perfectly balanced 100 buyers for 100 sellers in our ‘balanced’ example will cause two buyers to compete for the last house available … what would that do? … price would be pushed higher.  Or, we ass-umed that the houses were all alike, but what if they weren’t? What if the good ones were gone and the last buyers decided to wait…  and they didn’t buy then leaving some of the sellers to sit with their houses … hmm, would they lower the price to cause the last buyers to like them better … well, if they had to report to a new job in a different city on Monday, yes, there would be market pressure to have them do just that! Balance is quite simple to anticipate, imbalance makes us think … and whatever the experts call it, when we think and try to anticipate the future we’re just guessing. However, armed with some of the fundamentals of economics we become much better guessers!  Supply and Demand … most fundamental.

Economists, while they deal with massive amounts of data, tend to delight in the theoretical/philosophy/conceptual view of things …  it’s fun to play there because we can make up examples, so let’s look at supply and demand from there.  And let’s use, hmmm, real estate in DuPage County, IL.  As our example let’s say houses in Glen Ellyn, … no, Wheaton or Winfield or Warrenville might be better as there’s more buildable land there… Let’s say there were 100 families that needed houses (demand), and say that a builder had just built 100 houses (supply) … and let’s just pretend that those were the only families and houses in the universe (in this conceptual world we can make up things … which is helpful when we try to understand basic fundamentals).  So, what do we have?  A perfect balance.  Next, imbalance…

Supply & Demand.  On most every level supply and demand affect decisions (and the details and timing and terms and values of transactions that are part of those decisions … like most everything! ).  And real estate decisions are certainly affected!  Why?  Because value is affected.  But, first things first… the concept.

The only time supply and demand do not affect decisions is when there is a perfect balance. In real estate terms that would be when there are EXACTLY the same number of buyers (in the marketplace to purchase specific homes), as sellers (with homes that meet the specific home needs of the buyers).  How likely do you think that is?  Not likely at all!

Balance is rare and perfect is more rare, so the reality is we most often need to understand the imbalance (which is common).  So, next we’ll look at balance, then imbalance…

Hi!  It’s Jane Kendall here … and I spend my time dealing with all things real estate, mostly in and around Glen Ellyn & Wheaton, IL and DuPage County environs.  Even in ‘normal’ times the details surrounding the owning, buying, selling, and investing in real estate can be confusing, so an understanding of the fundamentals is helpful.  Presently we’re in a bit of a crazy time with the economy and the real estate marketplace, and some insight as to how those fundamentals can be applied to gain understanding in the shifting realities is necessary!

These fundamentals are not complicated, some might just be unfamiliar. Tying your shoe is complicated, it only seems simple because someone taught you the complicated process.

I will write here regularly and will attempt to simplify the unfamiliar and help you, the readers of my blog, to develop a knowledge base of real estate matters.  The increasing understanding you gain from regular readings will better equip you to make wiser real estate decisions.