Orlando Real Estate’s Changing Market
It’s mid August, 2007, and for some reason (professional changes, personal/family changes, moving, etc.) you have to sell your house/condo/townhome. Like many of our clients, you listen to the news, read the paper and see the media in general reporting the real estate market as being…well…harsh.
In this case, the media would be correct. We are in the most difficult real estate market in more than a decade. Inventory is very high in most places, sales are down, foreclosures are up in many states and nobody seems to know what to do about it.
So, people do what they have always done…they hire a Realtor or put their house on the market for sale by owner. Either way, the house just sits…and sits…and sits on the market. So, it must be the Realtor’s fault. So they switch Realtors only to find that the house sits…and sits…and sits on the market. Despite the Realtor’s efforts (open houses, broker opens, ads in the paper/magazine, listing in the MLS, signs, flyers, etc.) the house just sits on the market.
So, what does one do in a market like this to sell their house? LOWER YOUR PRICE!!! This is not just some ploy for a Realtor to get a quick sale and collect a commission check. WE ARE IN BED TOGETHER ON PRICE. THE MORE YOU GET, THE MORE THE REALTOR GETS. This is a simple formula of SUPPLY AND DEMAND. Right now, the supply in most areas is astonishing and the demand is not. Therefore, you have to ask yourself how your house is going to be the next house in your neighborhood/area to sell. Again, it’s simple. Lower your price.
Now that sounds great, but what if you bought your house a year ago as an investment and now find you’re in a negative equity situation. If you made the decision to buy a year ago by yourself…shame on you. If you had a Realtor that suggested to you to buy that property and now find you are in a negative equity game…shame on you both. First and foremost, YOU have to hold yourself accountable for the decisions YOU ultimately make. Don’t let a Realtor make the decision for you. I don’t care if the Realtor strong arms you and/or makes you feel like a stupid fool if you don’t make a buying decision. The bottom line is YOU have to be educated in how you invest your money. Let’s face it…it’s pretty easy to get your real estate license. About 40 hours in class and a pass the state test and suddenly you’re a real estate expert. Not quite. So, start taking action and get smart about how you invest your money. Start asking the Realtor questions about their knowledge in a particular area, type of real estate and ask the Realtor to provide you with supporting FACTS about why he/she believes this is a good investment. TAKE RESPONSIBILITY FOR YOUR INVESTMENTS AND STOP SOLELY RELYING ON A REALTOR.
So, now your back at selling your property in a ridiculously difficult market. If you don’t have negative equity, consider yourself lucky. Hire a reputable Realtor and LISTEN to what he/she has to say about pricing. Ask them for a copy of what is currently for sale in your neighborhood/area. ANALYZE YOUR COMPETITION!!! Make an informed decision of how to best price your home. With a surplus of inventory, it really doesn’t matter what houses like yours has sold for in the past 6 months. It only matters what houses like yours are currently on the market and what prices they are being marketed at.
If you are in a negative equity situation you have to do some math. Ask your Realtor to show you the last 10 houses like yours that have sold in the past 90-120 days and HOW LONG THEY WERE ON THE MARKET BEFORE A CONTRACT WAS ACCEPTED. Average those days and you can pretty much bet those houses were the best priced houses. Now take that average and figure out how much in total mortage payments you will pay out in that amount of time. If the average is 3 months on the market and your mortgage is $1,500 per month. They you will pay $4,500 over the next 3 months while your house sits on the market. So why not reduce the initial price by $4,500 instead of playing the negotiation game and taking a $4,500 risk? If the average days on the market is 6 months and your mortgage is $1,500 per month, you will pay $9,000 while your house sits on the market. Reduce your price by $9,000 instead of risking it. You MUST be smart about what money you have into the house, what money you will pay while the house sits on the market and what you will lose if your house sits on the market.
Obviously the best case scenario is not to lose money, but real estate is a risk…just like the stock market, mutual funds, etc. The question you have to start asking is NOT “how do I make the most money out of this real estate investment?” The question you MUST start asking yourself is “How much money WILL I lose if I don’t price my property to be the NEXT property to sell in my neighborhood/area?”
Do you best to take the emotion out of the equation and make a “numbers” decision. Even as rich and successful as Donald Trump is, he has made some real estate decisions that have proven to be mistakes. He doesn’t keep them, he reduces his loss by cutting the property loose at a price someone else finds a bargain.