Thursday, February 19, 2009

SMOOTH SAILING

The market and the economic stats that affect it have many folks wringing hands, scratching heads and afloat in a sea of uncertainty. We may all be in many different boats, but Captains attempting to navigate through choppy waters without a trustworthy Pilot and an accurate chart is a frightening and foolhardy endeavor.
To avoid ending up in the fog and on the rocks, you must be as well informed as possible.
Real Trends is a publication that tracks valuable stats for both Real Estate professionals and consumers. Steve Murray is the publisher of that well respected resource and the most successful real estate giants of the industry rely on his findings. I recently attended a summit for all New England RE/MAX owners where Steve Murray was guest speaker and the data he shared is invaluable to all Realtors and real estate consumers.
What can we expect for home values in 2009? The best we can expect is that the home values stay the same as they were in 2008, that is, no appreciation and no depreciation. (Buyers, buy that home you’ve been dreaming of NOW). The height of the sellers’ market wherein home values soared during the sub prime debacle was in 2005. Home values have depreciated steadily since that time and we will not see those values again until the year 2020.
When we apply that data to individual consumer circumstances, the Captain now has a Pilot to navigate through the choppy waters. Here are examples of real estate circumstances and the strategies best applied by a trusted Pilot.
1. FACTS:“Russ” owns a beautiful home in a lovely area in town. He wants to sell his home, but he would like to wait until “the prices come back”. He thought that he might rent the home until “the price comes back” to what his neighbor got in 2005. He owns another beautiful vacation home that he loves and he has given thought to purchasing a smaller property in a nearby town rather than own two large homes.
STRATEGY: If Russ waits till the price of 2005 “comes back”, his home will be another decade older and if he rents it during the “waiting period”, it will have the additional wear and tear that comes with rental territory. He will also have the additional carrying costs of repairs, maintenance, taxes, and all that is attendant to being a landlord for many years while he “waits”. It is likely that the large home he considers renting will depreciate further. If he sells it now at market value, he can purchase the smaller property at market value and the real estate transaction can be a “wash”. That which you sell “low” is offset by that which you buy “low”.
2. FACTS: “John and Penny” had their home on the market last year for $525,000. They have homes in two other states and their intent was to sell their large Massachusetts home and purchase a smaller one to maintain a presence near their grandchildren. Two offers came in at about 480,000. (The buyers would likely have come up to $495,000). The sellers were insulted. They had spent a great deal of money adding improvements to the property and despite the downward trend of the market, they would not reduce their price and they came off the market.
STRATEGY: The property is now worth about $450,000 and “John and Penny” have joined the ranks of homeowners who want OUT NOW. Anyone can put a property on the Multiple Listing Service. The key is to get you OFF the Multiple Listing Service for the MOST amount of money in the SHORTEST period of time. With very few exceptions, the stumbling block is the PRICE. The home must be priced just a bit UNDER fair market value because it’s not enough to be a “good” deal. With high inventory, you are in the best position to sell when you are the “best” deal in town. Fair Market Value is determined by comparing a property today with properties that have sold months ago. In a declining market, the savvy Captain and Pilot price the home conservatively and capture the most amount of equity as quickly as possible by doing so. (Multiple offers are born of correct pricing.)

This Pilot advises all Captains that no matter how choppy the water, we can avoid ending up in the fog and on the rocks by charting an aggressive and intelligent course that is based on accurate information. Pilots do not operate from fear of the unknown. We operate from understanding the facts, knowing what we can and can not change, and applying that wisdom to protect our passengers and crew. This Pilot wishes all of you Smooth Sailing.

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