Reality of Real Estate Bid and Asked Part 11 Merrimack Journal July 2007
Dr. Anthony G Ziagos, Sr.
Anyone who has invested in the stock market understands the concept of Bid and Asked. Supply and demand determines the price of anything of value. The value of Real Estate like Stocks and Bonds fluctuate with supply and demand. The Asked price of real estate is the perceived value of the seller and what they want in exchange for their property. This perceived value may be real or just something that sellers imagine based on their own preference. The Bid price is what is offered by a buyer who is willing to invest their resources in exchange for real property. Circumstance will determine if a buyer will pay more or less than an appraised value or what a seller is asking. The price is also influenced by the terms of the sale or if a seller is willing to share the risk associated with uncertain or unknown factors regarding the property. What makes real estate different than stocks and bonds, very little. Each one has an opportunity cost or "holding cost" depending on the situation. Usually holding real estate cost more than paper securities, however, the potential gain, short term or long term may outweigh the cost. The "unknown factor" is the gamble. Without a crystal ball, flippers, speculators, and investors always face a risk when buying real estate. Like any other investment, there is risk and reward. If you HAVE to sell, you get what the market offers. When a seller and a buyer cannot agree there is no transaction. Over supply of sellers willing to exchange real estate for dollars and lack of demand from buyers is what we are faced with in the current market situation. Transactions are made when two people agree based on their circumstance and minimizing unknown factors.
Here are two real life examples of current market situations. Both properties need work to move in. Property A is asking $325,000 for appraised property. Buyers 1, offered 260,000, buyer 2 offered 275,000 and buyer 3 offered 265,000. Seller said no to each one without a counter offer or reason. It appears they want to own this property for a long time, costing them $3,500 per month to carry.
Seller B is asking $225,000 for city property. Buyer offers $150,000 and seller counters at $190,000 they are still talking but not close enough for a transaction yet. Seller B appears to be more in touch with reality.
Based on the current market conditions there is a lack of demand for property at current asking prices. Appraisers appear to be at odds with buyers, sellers and lenders. A lack of understanding of the economics of the real estate market, the result slowdown in the overall economic landscape is further exacerbated by inaccurate interpretation of market conditions and economic reality of the marketplace.
Perhaps price is not the problem with the transaction? Maybe terms and conditions make it difficult for either party to accept an offer? High asking prices could be accepted if buyer and seller were to agree on terms and conditions that take into account uncertainty of the market and minimizing unknown factors. Again, write the offer and start negotiating a transaction.©2007 Middlesex Media Exchange/ All Rights Reserved
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