This is a tough one for people to understand, everybody wants a deal, and they don't know it when they see it. They all are. I have just as many buyers looking for homes today as I did 5 years ago, and all of them say the same thing. I want a deal. Well the truth is that every home right now is a deal compared to several years ago, just like the stock market. It's very difficult to find a home that's overpriced and get an appraiser to go along with it.
Find the home you love, understand that because of market conditions, it's priced considerably below what it was 5 years ago, and be happy that you made a good decision.
In Nashville, most homes are selling at 10 to 15 percent below 2006 prices, but in some areas, they haven't gone down at all. But remember that Nashville didn't have the big run up in prices that some areas in the west and northeast, so prices of Nashville homes really didn't have far to fall.
Since the beginning of the down turn in the real estate market real estate agents have been innundated with buyers who are looking for "a steal". Well, here's reality folks. It doesn't exist.
You see, unlike securities whose value are based on future earnings, or collectibles, whose value is based on the scarcity of the item, real estate's value is based on other like kind products or in real estate parlance, comparable homes.
The fallacy of "the steal" is that the buyer is going to find that one property that no one else in the market sees is undervalued. They're going to buy it and a price well below the market and then turn around and sell it for a huge profit. Well, as I like to say to my buyers, "if I see it's a great value, and you see it's a great value, a thousand other eyes also see that it is a great value." And more than likely the price will be bid up.
The other scenario involves buyers who think they are going to submit low ball offers and get "the steal".
Let me explain what really happens, based on the value basis of real estate that I noted above.
Let's say you, as the buyer, WERE able to land that "steal". What you just did was set the floor for all the other homes, including yours, in the area. Because WE as realtors base our seller's sale prices on the comparable properties in the area. So your attempt to then turn around and sell it at an inflated price in a depressed market is going to backfire on you.
This is what has caused the downward spiral in prices in most areas of the country.
My best advice when shopping for a home in this market is to realize that prices are severely depressed as they are. Now, there's nothing wrong with trying to negotiate A LITTLE off the price, but don't expect to come in with an offer 25, 30, or 40% below the list price and have it accepted. This is a buy and hold market. Not a flippers market. If you come into this market with the expectation that you'll be holding on to this home for five to ten years, you will probably make a good return on your investment.
We need to get out of that get rich quick mentality as a country. Which is EXACTLY what got us into this mess in the first place.
For more information about Phoenix and Scottsdale area real estate please visit www.ArizonaPremiereLiving.com
And for information about Anthem, AZ real estate please visit: www.AllAboutAnthem.com
EXCELLENT advice - the PRICE only matters when you BUY and when you SELL and the sooner homeowners stop thinking of their homes as an ATM, the better for them.
Hello Larry:
Good point. Every home today is a good value when compared to just a few years ago. The original post also made a good point about setting the market when the new low price is recorded.
Great repost on I want a steal, as this is the time when basic Economics 101 supply and demand plays a big factor on the price of homes. When the supply is high the price is low, when the supply is low the price is high. When demand is low the price is low and when the demand is high the price is high. The supply is high and the demand is low therfore you have relatively low priced homes...which are all relatively a steal.
Larry - great re-blog! I cannot tell you how often I hear this . . it can only be a distresed property 30-40% off price. As opposed to my other buyers who want a "bad" deal!