Anyone who knows me, knows that I am an optimist, a “glass is half full” kind of guy. Once an optimist just like me fell off the balcony of his high-rise hotel and people could hear him say as he fell past their floors…”so far so good….so far so good.” That being said, sometimes a dose of reality mixed in is called for, and I think this is one of those times. Whether you are a buyer or a seller, there are some things you should consider when looking at your long-range plans in regards to your real estate situation.
There has been recent news that sales in many areas have been increasing, good news to be sure, but as one of my colleagues recently learned at the National Association of Realtors convention in San Diego…although some (myself included) had thought we may be at the bottom in regards to property values, this appears not to be the case. Recent studies indicate that prices could fall further, and may not return to todays value until 2012. In my home state of Michigan and also in Florida, it is a little worse, with estimates that it will be the year 2023 before we get back to, today. This doesn’t mean we are going to see prices drop like a rock, like they have in the past, and it certainly doesn’t mean they aren’t going to come back, but the recovery is not going to be fast, and it’s not going to be soon. For example, in my business, in 2007-2008 my average price per transaction fell about 29% and I expect the 2008-2009 numbers to come in quite a bit lower than that. Much of this has to do with the high number of foreclosures and short-sales that we have experienced the past couple years, but that’s a subject all its own. (I’ll talk more about that another time.)
I’m only bringing this information to light because all too often I hear people say things like: “I’ll just wait a year or two for the market to turn around” or “I just had it appraised a year ago for $200,000, I’ll just wait for someone to come along who will pay what it’s worth.” As you make your decisions regarding your real estate, as a seller, you need to ask yourself: “Am I prepared to wait 13 years to go ahead with my plans?” If the answer is “yes”, by all means, wait it out, things will turn around, if the answer is “no”, then you need to price your home to sell and try to make up any loss on your next purchase.
And what is “priced to sell?” It’s not what your appraisal was 6 months to a year ago, because your property is most likely not worth what it was when that appraisal was done. I find that for a property to be “priced to sell”, it will have to be priced in the bottom 1/3 of similar properties in the same price range, maybe lower, the other 2/3 probably won’t sell for a long time, maybe…never. Just remember, it’s the buyer who determines what your house is worth, and in this type of market, it’s seldom what we think it should be worth. If you have determined you need to sell, then you need to remember two things I always tell my seller clients: “Selling your home in this market is a Beauty Contest, and a Price War…you have to win both!”
OK, let’s get back to the positive side, back to the optimistic side. The good news is, you do have the power to win both of these contests, and you can sell your house and buy another, probably at a price that will more than make up for any loss you may realize on your current home. More good news: The recent extension and expansion of the tax credit now includes a $6500 tax credit for those who have owned their primary residence for 5 consecutive years of the last 8, sell their home and buy a new one before April 30th, 2010. (see your Realtor or tax professional for details.) This should keep things moving through the winter, as people won’t have the luxury of waiting until spring, and still be able to take advantage of these tax credits.
As we head into the holiday season, we really do have much to be thankful for and reason to be hopeful for a brighter future, we just need to keep in mind the realities that we face, and plan accordingly. Those who do will be fine, in the long run, those who don’t are going to be saying: “I should have had a V-8.” (If you’re too young to know what that means, please let me know and I’ll be happy to explain.)
Happy Black Friday, and don’t forget to contact your Realtor for the best sales today, and best of all….there are no lines to wait in.