From the highly-desirable real estate market of the Pacific Northwest to the wildly-popular Florida real estate market, we learned that strategic real estate investments depend on 3 key issues: location, type of home, and current state of the market. Let’s start with the first key issue: location.
Location, location, location is something we’ve all heard when it comes to an important factor in real estate value. In the real estate boom, location wasn’t as important as it was when the boom started to go bust.
As prices were driven up by investors, it became increasingly necessary to move farther out of metropolitan areas to purchase an affordable home-especially if you were looking to work with a new home builder. It seemed like a reasonable option-you knew you were trading in easier access to the city for a beautiful brand-new home. But when it came time to sell, investors were jumping out, and real estate values began to drop. Suddenly, your almost brand-new home out in the boondocks isn’t looking as attractive to buyers as it had seemed to you two years before.
What about key issue #2: type of home? Perhaps you were tempted to “invest” in a town home or condo. The price was right and it was predicted that real estate values would only soar-especially in popular markets such as Las Vegas, Orlando, and the entire West coast. Well, in the downturn, town homes and condos are the first to drop in value. We had firsthand experience trying to sell a town home in the Pacific Northwest when the high tech bust occurred right before the real estate boom.
And then there’s key issue #3: the state of the market. During the real estate boom, investors all over the country drove up the value of real estate. And then when the boom became a bust, investors fled, leaving many homeowners in a less than desirable selling market. Many homeowners became frustrated over the dive their equity was taking as investors got out of the market, leaving a glut of unsold homes.
Unfortunately, the real estate boom did not reflect a true state of the market. And holding onto those inflated expectations isn’t realistic. A house is worth only what it can sell for. The real estate boom created a false sense of the market, and the market is just readjusting itself to a “normal” market. Just like the high tech boom that went bust, so went the real estate boom, or any boom for that matter.
So what can a homeowner do when trying to sell their home after the values have started to drop? Real estate agent Barbara Nelson has several tips on her web site, but the 3 most important tips we discovered through our own experience are:
Price it to the market, don’t be greedy. Sellers and/or inexperienced agents often think the home is worth more than it is. It’s important to check the sales prices of comparable homes that recently sold and the asking prices of comparable homes that are currently for sale in your neighborhood.
At first, we had high expectations and thought selling at that price would be fabulous. But we also knew that price was inflated. So we weren’t surprised when we had to lower our asking price. In the end, we felt good about what we sold our house for and the home buyer did, too. It worked for both parties.
Use an experienced realtor. We did and we could see the difference in our agent’s expertise compared to some of the agents showing the house.
In the boom, many people jumped on the real estate bandwagon and called themselves realtors. But many didn’t know what they were doing and made some costly mistakes. Don’t let that happen to you.
Offer incentives to the buyer. These may include paying closing costs, including the appliances and/or window coverings, or, in our case, offering a one-year warranty and advertising it upfront.
While Barbara recommends not moving out of the home because it gives a bad impression of the home being abandoned, I would say that depends on your circumstances. We had 3 cats and it was difficult to show the house, so we did move out. It was stressful paying on two homes, but moving out of the house worked out best for us. We were living in the house for the first 3 months and sold it within a month of moving out.
You can sell a home profitably in a real estate downturn if you set realistic goals and negotiate a deal that works for all parties concerned.