The Bubble Bath

By
Real Estate Sales Representative with Skyline Realty

I am not an economist, but an experienced realtor. In all my research on the theory of the "real estate bubble," there is always a constant. Over extended borrowers losing their properties to foreclosures and overpaid developers buying it all up to prepare it for a boom. It seems that the only way to make real money in real estate, is to wait for these dips and turns rather than rely on a time and inflation alone.

In times like these, you cannot burst out your door and find a great deal on an investment property or a condo, but you should not wait and hope for a bubble similar to the early 90's either. In theory, bubble or no bubble, banks cannot sell all their foreclosed properties if there aren't enough buyers to buy them -- they are terrified of people knowing this simple truth. I had a wonderful opportunity to present a great foreclosure to one of my clients and he refused, for example. Just because prices may go down and foreclosure may be imminent, I don't think that there will be this purchasing frenzy that will eat up all those foreclosures.

I predict that people may end up waiting a long time for such a bubble and end up finding themselves in another real estate boom instead. If that happens, then you will not be able to buy much. The only real bubbles will be the ones in your bubble bath that you're too tense to get into. So here is my advice to you:

1. Don't let your mortgage company drive you, stay on top and demand the best rate and closing package.

2. Take at least 3-6 months to look and don't rush the process. In other words.... enjoy the bubble bath.

3. Listen to your real estate agent. Never work with a buyer's agent you don't trust. Listen to your instincts.

5. Don't trust your lawyer just because he or she is your lawyer. Lawyers are human too and sometimes just want to wrap the deal and get paid. Instead make sure you hire a lawyer who represented a family member or a friend. Get references.

6. Think team. Most successful investors and homebuyers think of their mortgage broker, agent, lawyer, property inspector as a team. You are at the center of that team and your job is to manage them.

7. Know more than just the basics. Just like cars have blind spots, humans have those too. You may think you know everything, but chances are you don't. This doesn't mean you should rush to a bookstore and buy a book on investing or real estate in bubble times, it just means that no amount of knowledge can be complete and you should always prepare for surprises on the way. The bubble might burst, the bubble might not. Only with an open mind you will be able to choose the right investment.

In summary, I think their are too many people now enjoying their bubble bath and not taking action. Eventually the water is going to get cold and all the bubbles will be gone. You eventually have to get up, out of the bath, and move on with your life. In times like these, it is important to analyze all data, but also balance it with your gut instinct.

Here are other tips:

1. Be positive. Negativity never leads to success.

2. Be realistic and watch out for false expectations.

3. If you are a buyer, don't expect the market to burst as in recent years. This bubble is predicted to be a softer one. You might lose more money by waiting and doing nothing while huge developers build skyscrapers all over the city.

4. Go for the unique. Don't do what every one is doing but at the same time, don't go buying Ikea counters and cabinets....

5. If you are a seller, offer your buyers customizations on their place and respect the power of the buyer. In some situations you may need to cater to your buyers like you would your boss. At least you know the job will get done.

6. Diversify and don't put all your money in real estate.

7. Recognize that if everyone thought like you, nothing in the world would ever happen.

Comments (2)

Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

NICE post Alex. Great points all and particularly the final one! :)

Oct 01, 2009 02:35 PM
Alex Haidar
Skyline Realty - Cambridge, MA
REALTORĀ®, CEO - Skyline Realty

Thank you!

Oct 01, 2009 02:47 PM