I'm looking at all the properties on the market right now in my area of Weston Florida and I keep wondering when changes will come...not anytime soon. I don't need to keep reading how the media interprets whats going on in the Real Estate market. I already know what's going on. I'm a Realtor®....I better know whats going on or I might as well just get out of the business. I'm primarily a listing agent so my job can be very difficult these days. I remember when taking a listing was easy. You take it and it virtually was sold overnight. It didn't matter what the size was or what the condition was or even where it was located.
Now when I go on listing appointments I'm finding it even harder in some areas to pin point the actual value of the property. I find myself turning down more and more listings because I refuse to waste my time and a sellers time with false promises. CMA's can be difficult to prepare in a neighborhood that hasn't had a few sales let alone one in the last 2 years. I'm even finding myself using a few more pending sales just so I have something to show them that justifies today's value.
I will start off by only going back over the last 6 months. It makes no sense to go back further but sometimes I'm forced to look back further because I simply can't find anything to support the sellers premise of value. Even going 1year back... you still might not have anything to support your findings and that makes my job even harder. For example...5 years ago I took a listing ....the seller wanted it listed at $239K. At that time I told the seller that according to my figures it was only worth $185K. They refused to "give it a way" and that's their prerogative but it was on the market for almost 3 yrs and eventually I was able to have the seller re-position it in the market at....but by the time they were really motivated to sell it...it sold for $62K. Now why did this happen?
Here is the problem...this was during the biggest influx of short sales and foreclosed properties flooding the market so now all the other properties in the same neighborhood and the same size and condition were selling for this sellers final sales price. I explained to the seller that now...all the others were becoming their competition. While they refused to see the reality going on...we had only a handful of showings and then they go look at the competition and they see what compares. So what happened? They just wasted almost two years and now the original price point no longer exists. Please note that before I even considered to list that property...it was listed with another agent for 6 months. It turned out to be the sellers relative which was a dis-service to the seller because it was easy for a relative to tell the seller what they wanted to hear...... It's easy to hire a relative but was hard to fire a relative. Many agents that are hired to list properties will tell the seller anything they want to hear just to take the listing. They do this in order to keep the listing and hope that the seller will re-position the property in the market later. (To define what I just said...it means to get the seller to keep reducing the asking price until the activity increases and you get an offer) Occasionally I have to do this as well. But it's much easier to aggressively price the property within a "price range" and in mot cases the property sells quicker and within the correct price.
So how can you justify today's value? In most places you simply can't. Another example would be when your market is flooded with thousands of homes just in one county the consumer is looking to see how much they can get for their home but it seems they are generally looking at how much the homes in their area are selling for and not what they sold for. Many times I will walk into a listing appointment and before I can pull out any information to justify the value...the seller throws a number at me that is not even close to what I think the homes is worth today. I will usually inquire how they came to that number and I get the same story most of the time. The consumer usually doesn't look at closed sales over the last 3-6 months. They are looking at asking prices but what your asking doesn't tell us what your really going to get. I've seen homes asking $750K that ended up selling in the end for $400K. So how can you justify the first price point if it ends up selling for $350K less? Another problem is you list to sell ratios....if that example above were to sell the ratio would reduce the neighborhoods values even more when the next home goes on the market. The house down the block is not as nice as ours so I think it's worth X. They don't realize that most homes that are sold will require some sort of financing and if it doesn't appraise then they just wasted their time.
It doesn't matter what I think it's worth.....it's what the buyers and sellers are negotiating in today's market place. Even if I say that X is what your value is they still don't realize that this is today but in 30-90 days from now it probably will be worth less in this market so catching up to the market is a bigger problem right now. By the time it hits the market....5 others come on for less or a few might close for less. Right now I'm only looking to get some warm bodies to want to see these properties. If you aren't receiving a call to see it then most likely it's on Pluto. I have properties that I have listed right now at really reasonable market values that aren't getting much activity. These are just a few examples that could be happening .
- Not many buyers looking in that price range
- buyers in that price range simply aren't qualified for loans
- buyers are reluctant to purchase a home with less than 20% down in case they lose even more equity in the home
- Sellers still can't accept the fact that they most certainly won't get their price no matter what we do.
- Banks aren't lending money unless strict guidelines are met on these specific properties
- Too many others that are similar or are bigger for the same price.
- Buyers are still wating for a better deal
- Buyers are spending a lot more time looking before pulling the trigger.
Price per square foot just isn't working in my area. If you look back during the Real Estate boom...you'll find that most buyers didn't care about that formula but they still couldn't figure out how two of the same exact homes were selling at such a different spread. So how can you justify it today? You can't.... It was a domino effect. When one house would sell without the contingency of the appraisal then the next house can sell for the same or even more. So every time another home sold for more...the neighbor would try to get even more thus we have ourselves an inflated market....now the same thing is happening in reverse.
How about all those builders who were selling new homes and the price per square foot just didn't make sense. How did all these homes appraise? What about all the speculators who bought a home before it was built only to find out that they can't even sell the home after it closed with the builder because the builder valued it too high and the buyer is stuck with it? Today's value is kind of like the saying...ok so now what have you done for me lately. How many times have your clients called you and asked you you when is the market going to change or whats going to happen to the values. Are they still decreasing or are they increasing or are they going to level off? If I could give everyone the right answer I'd be a millionaire.
Buyers are more educated these days and should ask their Real Estate agent to show them the closed sales over the last 6 months to support the offer they want to present. This is one of easiest ways for a buyer to determine what is a fair offer and won't insult the seller. They have a better chance of keeping the negotiations and a dialog going. Sellers need to start to think more like an appraiser and also to put themselves in the buyers shoes.
Market correction takes time and there is simply no way to pinpoint the exact time it will take. Remember when people were saying the bubble would burst for 5 years and then it finally did. So now people ask me when will the bubble grow again?...there is no way to tell how long or even if we will ever see the market we saw 7 years ago.
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For more information ....Please contact Neal Bloom-Realtor® /Keller Williams Properties
1625 N. Commerce Parkway,Suite 105
Weston FL 33326
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