I do believe that the seasonal markets have become more important, however.  If you talk to the old-time realtors, there were definitely high and low seasons in the past.  Then for the last 10 years or so, our market has been hot.  You could sell a nice house almost 12 months of the year, with the spring season being ridiculous.

But starting last summer, we all began to detect a change.  More inventory was on the market and buyers were a little more tentative.  The buyer without a house to sell was (and still) is king.  The buyer that has to sell a house before they can buy your house is routine. 

I had a flip house to sell and I definitely wanted it sold or rented by August.  I was literally days away from putting the “For Rent” sign in the yard when I got my solid offer.  Then, true to Murphy’s Law, I had another buyer that wanted the house really bad and would have paid more.  But truth be told, it took longer to sell and I took less than I wanted to. 

This past winter, sellers started feeling the transition.  I had my eye on more great fixer-uppers than I had seen in the previous 4-5 years.  Each had great upside profit potential and all were in good neighborhoods. 

I also saw a lot of great options in houses that I call “Dated Houses.”  These are typically houses that were owned by older people that have really good bones and are in good neighborhoods but really need updating.  The nice thing about these houses are that often the systems and fundamentals are in great shape so you can spend your time doing things that are more fun and profitable.  It is also usually easier to budget, because the work in these houses is usually pretty straight forward. 

This spring, I worked with clients buying both these types of houses and I think we were very successful.  We found under-valued properties in West Lawn, Sunset Village, Hill Farms, Highland Park and other great neighborhoods that hold their value well.  A lot of these houses were houses that were vacant and had been on the market throughout the fall and early winter.  March was actually a very good month for me because there were so many good opportunities leftover from the winter.

I think there are going to be some really good options this fall and winter as well.  Here are some key tips for the Madison market.

1)      Look for the dated houses – Older people often decide to leave their homes in the fall.  Often they want to stay in their homes one last spring and summer.  By doing this, however, it puts them in a poor position to sell.  They have fewer buyers and more inventory to compete with.  These homes are great for the first-time fixer-upper client – usually these have been kept up well and your sweat equity will go far.  The amount you will have to put in may be less than a typical fixer-upper as well.  You may not make the huge profits of a true fixer-upper, but you should walk away with a nice nestegg and a great experience.

2)      Look at the FSBO Market – I think the FSBO market is having a rougher time than in the past.  My opinion is that because there is more inventory, realtors are not showing FSBOs as much as they had to in the past.  This is then exacerbated by the fact that many FSBO’s won’t work with a buyer’s agent or are extremely difficult to work with or difficult to schedule showings.  I can give you several examples of houses that I know I could have sold had the FSBO owner not insisted that I never, ever call them.  I know the houses sold for less than my buyer would have paid in the end as well. 

3)      Low-balling is back –   In the past, low-ball offers were highly discouraged.  Realtors didn’t want to write them because sellers instantly became offended.  But the truth is, now sellers are taking a much closer look at all offers.  I have been surprised several times this spring at what my sellers were able to get for prices.  Maybe the low-ball offer wasn’t accepted, but the counter-offers were much better than I ever would have expected in the past. 

4)      Concentrate on solid neighborhoods – There are many neighborhoods in Madison that are historically more solid than others.  While many neighborhoods have improved with our housing boom, a safer neighborhood might be a better bet, all things being equal.  Carefully look at the existing inventory in your chosen neighborhood and know how your house fits in, especially if you are looking for a quick sale.

5)      Be careful in the high-end market – There is a glut of high-end homes on the market in Madison right now.  The market is good for houses under $300,000, gets a little denser around $350,000 and the glut is incredible over $500,000.  (Email me and I’ll send you the complete breakdown.)  So if you are looking for a house to live in and plan on staying a little while, you should be able to get more house for the money than you could have in the past few years.  Conversely, if you are looking to sell or flip a high end house, you should be careful, have a back-up plan and price right from the beginning.

6)      Make sure you do your homework – As this is a rougher market, the market is going to be less forgiving than it has been in the past.  Make sure your comps are solid, that you have correctly budgeted the expenses and that you have your worst case scenario worked out.  Now is not the time to make mistakes out of emotion or lack of knowledge.

I hope this helps.  This year is the year that you could get your best deal or make your biggest mistake.  The rules for buying, selling and pricing are already different this year so do your homework and enjoy your best fixer-upper ever.

By Troy Rost

7/18/07