THE BLOG
07/12/2010 04:15 pm ET | Updated May 25, 2011

When Sellers Don't Owe, They Can Go Low

Residential real estate activity is definitely increasing in my suburban NY law office. But is not a full-throttled return to the boom days of yore. It is more like a semi-surge, based on a subset of sellers who have the motivation and capacity to make deals happen. List price or location is often meaningless; homeowners having the financial flexibility to accept buyers' bottom-brushing bids are succeeding where their cash-strapped counterparts are not.

Sellers are painfully aware that a glut of inventory (with more coming on the next wave of foreclosures), augmented by the absence of an attractive tax credit, has translated into far fewer buyers than were out and about in March and April. Though rare, this summer's bold buyers are following in the footsteps of pioneering purchasers of recent years who blazed a downhill trail of prices. Scarce but motivated, the current crop of buyers justify their low bids on factors as diverse as economic uncertainty, school district cutbacks, regional unemployment, stock market fluctuations, nebulous appraisals, tightfisted lenders, and global unrest.

The scorched earth approach to prices being waged by many would-be buyers has scared off all but the most fortified of house hawkers. For the plucky sellers that remain in this market, their ability to meet buyers' demands without blinking often seems to correlate with the amount of money (if any) that they owe on their mortgages.

In more than a quarter of a century of practicing real estate law, obtaining a "payoff quote" to satisfy a seller's mortgage was a common part of my routine. Rare was the homeowner without a mortgage, unless the sale involved an estate or a well-heeled investor. But recently, in half of the residential transactions that I have closed, mortgage-less sellers have sat next to me at the table.

The other 50% of those sellers with viable deals possess a passel of equity in their homes. Whether they bought many years ago, diligently paid down their mortgages, or refrained from refinancing during the past decade, these owners owe out a great deal less than the market value of their homes.

One home seller recently told me he's "taking a worthwhile bath" to make a deal. Another admitted he "hated" to accept a low offer, but knew it "was time to move on." A couple shared that after rejecting two deals in 2009 that were "way too low," it finally dawned on them that they could realistically afford to lose paper profits in order to achieve their ultimate goal of moving closer to far-off family.

While it may not make headlines in this vexing and perplexing real estate market, I am seeing a definite trend among financially secure home sellers who truly want to make deals. My clients are demonstrating that if your balance sheet is solidly in the black, and you stop chasing after unrealistic equity, you'll be able to reach down and hit a buyer's low-ball pitch solidly out of the ballpark. That's a home-field advantage!