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Buying strategies in a declining value economy

By
Mortgage and Lending with Mortgage Intelligence Mortgage Consulting

Every financial planner will tell you to BUY ALL the time and your stock price will even its self out over time, but what about real estate?  How do you buy real estate if you think values may be lower tomorrow?  The answer is found in the 3 reasons people buy real estate.  People buy real estate as 1) a "hedge against inflation", 2) as an opportunity to capitalize on value appreciation and 3) personal use.  Notice that only one reason to buy is tied to value.  So here is how we bring attention to another reason to buy.

Personal Use:  The idea that the buyer will obtain personal utility or satisfaction from a purchase.

In a fast and furious market, buyers tend to purchase whatever is available.  They will say things like "I dont like this, I don't like this, I don't like this", but when the real estate agent says that there are already multiple bids...the buyer jumps to bid despite the house's faults.  This leads to some serious soul searching and likely a move a few years later.

Slow Market Advantage - In a slow market, buyers will have greater inventory to search through, minimal pressure to find what they want and competative price.  Slow markets are about people finding their dream home.  This needs to be driven home with the public.  This is their opportunity to get it right and buy their dream house.

Cash Flow purchasing -  The home they hate...the "good enough" house...the "status quo" home will likely have to sell prior to completing the sale on a new home.  Likely, the new home will cost more than the old home and the client will have some fears about not getting their money out.  Fear of losing money and not getting the maximum value for his house is a major obstacle.  BUT we have done this to ourselves...How many times have you said " a house is a great investment".  Well, a house is no longer a great investment.  A house is a castle which meets families needs, protects, builds memories and projects a person's identity.  So get the old thinking about investment out of your consciousness.  Homes don't make you money, they provide for your families needs, wants and desires.

Fact: the market you sell in is the market you buy in.   Cash flow purchasing is looking at the monthly payment the buyer can afford and matching them to a product.  Sale of house aside...what can the buyer afford.  The key is not the price you pay for something...its whether you can afford to buy what you want today.  A house is worth spending money and time on, to get exactly what you want because of how many hours you will spend in it.   The perfect house is worth the cost today due to how happy you will be in it.  Inflation make the perfect house unreachable tomorrow...so buy today.  Take advantage of market conditions! 

In conclusion, this marketing strategy ties into the dissatisfaction many buyers have in their current house.  Listen to what they hate about their home and don't allow the buyer to repeat the mistake of settling for second best.

Good luck out there

Steve Bucher, Mortgage Consultant
416 - 500 Notre Dame Drive
Kamloops BC  V2C 6T6
(250) 682 6077
www.mortgagebuilder.ca