Economists pour through reams of statistical data and draw conclusions based on history. Surely they must be the ones that can tell us what is going to happen with the real estate market going forward, right? No. Unfortunately, they can't. They can use their data to make sweeping generalizations about the national real estate market, but the information does not translate properly to local markets. However, this does not stop them from using the mass media to alarm the public with their findings.
So, it must be the REALTORS® who work in various LOCAL markets that can tell you what's going to happen in their area. After all, REALTORS® have all of the relevant local data. Surely they must know what is going to happen, right? Not exactly. Although we know how much homes are selling for, which listings are expiring and which homes are currently on the market, we can hypothesize about the near future, but we certainly cannot give any guarantees as to what the local real estate market will do in the coming months.
So if it's not the economists and it's not the REALTORS®, then who is this guru that can tell buyers when to buy and sellers when to sell? It's December, so it must be....Santa Claus! Of course! It makes perfect sense. After all, he sees you when you're sleeping and he knows when you're awake. To top it all off, he can deliver presents to every child in the world in one night. Surely, with these powers, the mere predicting of real estate trends should be like child's play to Santa Claus, right? No, I'm afraid even Santa Claus cannot predict what's going to happen in the real estate market.
Give up? The answer is a homeowner living on Long Island. I know that you must find this shocking because I sure did. Why hasn't the whole world heard about this homeowner? Why isn't he the one talking to the media? Why doesn't he become a REALTOR® and guide all of the other REALTORS® with his vast knowledge? If you're finding this hard to believe, please read the following example of this homeowner's wizardry.
This homeowner was trying to sell his home. It was on the market for the whole summer with a listing price of $419,000. The three month listing expired, and he put the home back on the market with another REALTOR® with a listing price of $409,000. About five months after the home first went on the market, a buyer that I'm working with made an offer of $375,000. The homeowner countered the offer at $390,000. The two sides were deadlocked, but if there was a way to get this deal done, I was going to make it happen.
The mortgage broker that I recommend regularly has been working with me on using a point buy-down system. Most times buyers think that they have to buy the points to reduce their mortgage rate, but it can also be done by the sellers. Since these buyers were already working with my mortgage broker, we decided to have a sit-down meeting about using this point buy-down system to increase their offer. The system requires some explaining, and I will provide further explanation in an upcoming post. For now, suffice it to say that using this system creates a win-win situation.
It is important to note that this particular home is located in an area where there are a great deal of foreclosures and short sales, mostly due to the fact that many of the buyers in the area in recent years were sub-prime borrowers (bad credit, little or no down payment). When the sub-prime mortgage issues came to a head earlier in the year, this was one of the hardest hit neighborhoods. Even though sales prices in this particular part of town haven't dropped in the past few months, they haven't appreciated either. Local inventory has sky rocketed however, so the only homes that are selling are the ones that are priced to sell and/or in outstanding condition.
This home was priced slightly above average, and its condition would be considered above average for the area. The comparables show that similar homes sold for around $400,000 in the past six months. However, this home had gotten somewhat stale on the market, and the offers weren't coming in. At this point, there were no buyers willing to make offers in the $400,000 range for this particular home. Another factor that plays into this scenario is the fact that many buyers in this area are still likely to be sub-prime borrowers that may have a hard time qualifying for a mortgage.
The buyers that made the offer through me had credit scores hovering near 800. They had a more significant down payment to put down than many other buyers in the area. The buyers intended to apply for a 30-year fixed loan, showing full documentation. Being that they were renters with no lease, they were willing to close within 30 days, which is no easy feat on Long Island, where most closings take 60-90 days. These were dream buyers coming in at a very fair price. Through creative financing, we got the offer up to $388,000.
The mortgage broker and I went to explain the point buy-down system to the homeowner, and showed him how both parties would benefit by using this technique. He seemed to understand fully, and said that he just needed to talk it over with his wife.
The next day, the other agent called me and told me that the homeowner decided not to take this offer. Over $2000! Are you kidding me? The agent then told me that the homeowner decided that even at $390,000, he wasn't making enough money on the home. In fact the exact wording was that he was "losing too much money on the home!" I was left speechless, but here is the best part.
Remember, this post is about meeting someone that can predict the real estate market. The facts show that this home sat on the market for three months with one broker at $419,000 and expired. It sat for another two months with another broker at $409,000 and had only one other offer that never came to fruition because the buyers couldn't get financing. The homeowner decided that if he waits a year, then the home will sell for around $450,000 - $460,000. This is based on his opinion of what's going to happen, and absolutely no factual data to support this claim.
I implore all Long Island homeowners to speak to this man with the crystal ball. He can tell you with absolute certainty what your home will sell for next year. Personally, I can't wait for 2008, and I'm sure that you can see why. I've met the man that can predict the real estate market, and he sees it rising dramatically next year. He's not just a myth. I shook his hand, so I know that he's made of flesh and bone. This guru has spoken and an increase of nearly 20% in home prices is on the horizon for 2008 for Long Islanders!
About The AuthorAdam Waldman is a Long Island Residential Real Estate and Relocation Specialist that can assist you with the purchase and/or sale of real estate on Long Island or any place else in the country by connecting you with a relocation professional in your destination of choice. Many Long Islanders have chosen to relocate to other parts of the country, but often times they don't have anyone to turn to for assistance. Realizing that this was an underserved market, Adam Waldman has created a team of professionals throughout the country to ensure that relocating Long Islanders enjoy a smooth transition to their new area. These professionals are experts in the field of relocation and can serve many purposes beyond a simple home search. Please visit www.TheLIReloGuy.com for your relocation needs and www.AdamWaldman.com for your local needs.
Adam Waldman - RE/MAX Best - 631-357-2036 - adam@AdamWaldman.com
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Very funny post. Good stuff from a former Long Islander!