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The market is full of investment opportunities. There are stocks, bonds, treasury bills, and real estate, to name a few. The problem arises, because these are usually all clumped together in the same sentence, as done above. Because of this, investors many times forget one key difference between them: liquidity.
Yes, all of them do rise and fall in value; many times it is in unison with each other. Yet, some may be sold at a moment’s notice at market price. Real estate, however, is not among them. If an investor were to take out a certificate of deposit (CD) for 5 years, but decided to sell early, he could. He would also incur a lower rate than promised as well as fees for closing the account early. In the same way, if an investor wants to sell property quickly, it can be done, but it will be below market value.
Properties that sold in Palm Coast in 2009 were on the market for an average of 159 days. That’s over five months! This is the market we are in. It is a buyer’s market and they are taking a good hard look at everything available and making careful decisions. They are comparing apples to apples and are not willing to overpay. If a buyer ends up overpaying for a property in this market, they did not have a very ethical (or at least an incompetent) real estate agent. There are 2898 properties on the Multiple Listing Service as of now for Palm Coast and the number keeps rising. With that many properties, the only way to stand out is price. If there are 30 properties that match a buyer’s requirements and 15 of them were marketed perfectly, only the five least expensive are going to be shown.
I hear two things a lot from sellers. One is, “What price do I need to list at to sell quickly”? This question is always directly followed by the statement, “I don’t want to give it away”. Right now, if you can find a buyer who is qualified to purchase your property, wants it, and is within 7% of asking price (which should only be slightly higher than the market value computed through comparable properties), you have a great offer and you should be running as fast as you can to sign the contract. Consider this, for all of the properties sold in Palm Coast in 2009 through the MLS, they ,on average, sold for 89.1% of asking price; 73.37% of the original listing price.
The second statement I hear frequently comes from the seller who says, “I need to get this price for the property”. What they really mean to say, is they WANT this price for the property. If they get the price they want for the property, it would make life much easier on them. Let’s go back to the stock market. When selling a stock, does an investor say, it is worth $65 a share right now, but I am going to sell it for $75? No, the price is $65, no matter what the circumstances, unless, of course, they want to wait for the market to change. The real estate market is changing, but it is still going down and may continue to do so until at least 2012, some estimates reach to 2014. There are many reasons for this, most of which tie back to the mortgages that were made and when their interest rates are going to reset. Investors must remember that the market value is determined by one factor: What a buyer is willing to pay for their property. Because, if you have something, that no one will buy, it is not worth anything but sentimental value. Do not price your property higher than is suggested by your real estate professional, because, if you do, the market is dropping, while you are sitting on your investment. Better to sell at market value, and not have that value drop on you.
If any investor is banking on their owned real estate being a liquid asset, they are going to have to reset their expectations and realize that selling will be a longer process than originally anticipated.
Buyers also have to realize that many properties are asking only their market value or less (particularly foreclosures and short-sales). Gone are the days of offering 20% below asking price. Only view properties that you are qualified to purchase at their asking price, if you think the asking price is unreasonable, look at a different property.
Most importantly, buyers and sellers, remember that your real estate professional is there to help you. They are not there to wear you down on price; they are there to give you a realistic picture of the market that they work in daily. Until the market stops dropping, we will be the “bad guys” to a lot of sellers, but please do not shoot the messenger. Instead, be glad that you do not have an agent giving you false numbers when you are planning your financial future.
