Reality hits Real Estate – Solution: Sell Low and Buy Lower

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As a Realtor, my objectives when selling a property are rather straight forward: Sell my client’s property as quickly as possible for the best possible price. For years, home buyers have purchased homes with belief that when it came time to sell, they would make a profit. More recently, we have experienced a recession that has dramatically affected the housing market. Much of what is currently transpiring is due to several factors such as lax lending standards, historically low interest rates, and speculation.

With interest rates low, loans were being issued at a more rapid rate. Lax lending standards allowed borrowers that wouldn’t have typically qualified for loans to receive them. With more money pumped into the real estate market, supply was comparatively low and demand was high. One of the most fundamental rules of economics is when supply is low and demand is high, prices go up.
In recent years, practices have become unsustainable. A greater number of borrowers have failed to make their payments and have ultimately defaulted on their loans. More and more homes on the market have become short sales, foreclosures, and sellers that need or want to sell because it has become increasingly difficult to carry the cost of their property. In regards to short sales or foreclosures, in most instances the bank or lender is not looking to receive “market value” on the property; rather, they are trying to recover the outstanding loan amount on the property.
With more and more homes on the market, and fewer buyers looking or qualified to purchase, supply is high. Although interest rates in the early part of 2011 remain at historic lows, lenders are now more cautious about whom they issue loans to and want to be certain that those they are issuing loans to are both able and likely to make required payments on their loan. Again, basic economics…when supply is high and demand is low, prices fall.
As a home seller, you want to sell your home for as much as you possibly can. This makes perfect sense. However, a home, or any item for that matter, is only “worth” as much as a ready and able buyer is willing to pay for a particular piece of property. At this time, I want to offer some simple advice if you are currently in the market as both a seller and a prospective buyer.

1) Before you place your home on the market, have a Realtor perform a market analysis for you. The best way to determine what your home is “worth” is to learn how much similar properties in your area have recently sold for. In addition to learning how much homes have sold for, also ask your Realtor for a list of properties that have recently expired. In most instances, a listing has expired because the property was listed above, or a seller was not willing to accept an offer, at a price a particular market would bear.

2) After you have reviewed properties that have both sold and expired, familiarize yourself with listings that are currently active in your area. Again, think about supply and demand. If supply is high and demand is low, and you want to sell, pricing your home more competitively will make it easier for you to attract potential buyers.

3) HERE IS THE OFTEN OVERLOOKED TRICK – talk with your Realtor about homes in the area in which you would like to move. Have your Realtor find you homes in your desired location that are a great value. These may be homes that offer the most square footage, upgrades and amenities, acreage, etc., in the area in which they are located. Value is a personal judgment that takes into account what is received for the price that is paid.

As a seller, you may not be able to make a profit on your home when selling. However, you may still be able to come out even or ahead if you understand how to be a savvy buyer. In this market, it is even more important to work with a good real estate professional. When working for their seller, a good agent will be able to determine the correct list price for your property, market the property effectively, and takes steps necessary to ensure a successful closing. When working for their buyer, a good agent will help their buyer find a property that not only meets their needs, but is also a good value. A wise investor can come out ahead in any nearly any market, whether good or bad, if they understand economics.
You may have heard the saying, “Smart investors buy low and sell high.” In this market, I would also argue that you can come out ahead if you are willing to sell low and savvy enough to buy lower!

Brian A. Peters, M.B.A., M.S.A.
Shorewest, REALTORS®

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Categories: Home Buying

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