By Doug Holmes, contributing editor | As the market conditions change, so do the types of competitors for traditional sellers.
With the real estate market in Charleston and Charleston itself doing so well right now, new construction is on the rise. During the downturn of 2008 to 2012, new construction hit a low point. Many contractors went out of business. Now that has all turned around. New construction now makes up over 40 percent of all the properties currently under contract in the tri-county area!
This can be major competition for Joe and Sally Homeseller who can’t offer free upgrades and other incentives. Traditional sellers must know what they are competing with. We have several areas where new construction is the predominant seller. These include Johns Island (70 percent of under contract properties are new construction), North Charleston outside Interstate 526 (50 percent), Mount Pleasant north of the Isle of Palms Connector (64 percent), Goose Creek (55 percent), and Daniel Island (55 percent). Big builders have many advantages that they can use to compete with traditional sellers. They can offer several different types of incentives, including helping the buyers with their closing costs and financing.
However, buyers should approach new construction with caution. This is best done by them having their own buyers’ agent. Many buyers of new construction make the mistake of not having any representation. A good buyers’ agent can make you aware of all the potential pitfalls with new construction and their private contracts. Normally when buying a home from a traditional seller, a standard South Carolina purchase contract is used. This standard contract is equally protective of the buyer and seller. However, when you purchase new construction, you will be required to use a purchase contract that has been devised by the builder and has been designed to protect the builder at every turn. While a buyer’s agent will not be able to change that contract, he will at least be able to make you aware of the pitfalls and keep you on schedule with all of the deadlines.
While new construction is a big competitor now for traditional sellers, short sales and foreclosures are no longer much of a concern. At the worst in 2010, short sales and foreclosures made up over one third of all the properties that went under contract. Now, that is down to about 7 percent and is relatively insignificant. Short sales don’t make much sense for any of the parties involved anymore. A short sale is a situation where a homeowner owes more on the property than he can sell it for. He has to get permission from his lender to sell it for less and the lender giving this permission accepts the loss. This was done readily when the prices were dropping. Now that prices are rising, banks don’t really have a good reason to do this. And they don’t really want to foreclose on a property. They’d rather wait, often without payment, until prices improve enough that the seller can sell for more than he owes.
Doug Holmes is a local Realtor with Keller Williams. He also provides markets analysis for a fee to several hundred local real estate agents. He has a bachelor’s degree in physics and math from the College of Charleston as well as a master’s degree in math from the college, where he still teaches a couple of statistics classes in the fall. Visit his website here: www.CharlestonHolmes.com