To Sell or Not To Sell
Posted By admin on March 12, 2009
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Real estate is in the media a lot lately. It has been in the media as a negative item for much too long. The reason is that unlike stock or bonds real estate will never go to zero. Yet, it will appreciate and depreciate, but most importantly it will always have value. Even though in the present market the value has depreciated by as much as twenty seven percent in some markets, a lender, a homeowner, can still get value from the sale or refinance of the home. It is, however, very important to be abreast of how much the value has depreciated to determine if right now is the best time to sell or refinance your home.
If you are considering becoming an investor this is the best time to be an investor due to the depreciated value. There are great deals in this market.
However, as a seller, it is not the best time to sell. The value that most sellers paid for their homes a few years ago is no longer possible in the market. Therefore, if you do not have to sell do not sell. If you must sell price the home at a list price that is median of the comparative market value. What does that mean, you ask? Let’s examine.
It is important to get a realistic view of values. When the seller is viewing the comparative market analysis provided by the Realtor. It is important to make sure it an analysis of sales from the last six months of similar properties to your home.
In addition, it is equally important to know how many properties that are actively listed that are similar to your home.
To get a realistic view of the value of your home, we will examine the absorption rate. The absorption rate will evaluate pricing categories ranges for properties that are similar to your home. Let’s say you and your Realtor want to list your home between 175-200k and 225-250k.
Next, we pull up all properties regardless of features that are active, pending, and sold between these price ranges. We will also pull up the total number of closed properties within the zip code of the subject or potential listed property as well as, all the actively listed properties in that zip code.
The information that is gather through this evaluation you will be able to get a view of where the competition is for properties that are in the same price range as your home. The goal of this absorption rate analysis is to track where the money is. Remember, most buyer search and purchase homes by specific price point not by features along.
Now, back to our example, let’s say that over the last six months a total of 18 homes sold. Then, you would divide “18” by 6 (for last 6 months). This will give you the average number of homes that sold over the last 6 months. The answer in this case is 3 homes.
We also want to know the average number of active listings. For this example, the number of active listing is 24. Then, you would divide 24 by 3 (# of solds on average for last 6 months). The answer is 8. 8 is the total months of inventory for the price point.
The latter information should indicate that this is a buyer’s market. In a buyer’s market, the buyer must be aware that being in a buyer’s market doesn’t make the buyer’s job any easier. It just gives the buyer more flexibility. Remember in a buyer’s market, there may be several buyers for one property or only one buyer for a property.
If there are no other buyers for a property by virtue of the length of time the property has been on the market then a low offer may come in to the seller. Sorry sellers. However, sellers that do not mean that you have to give your properties away, but it may mean that you may have to settle for less than you anticipated selling your home.
Another thing that makes a buyer’s market advantageous to the buyer and not to the seller is that there are a lot of homes to choice from that may meet the buyer’s criteria.
It is important to evaluate the pricing of your homes in several different ways to help get your home sold as quickly as possible. Your home can sell even in this market, but it has to be priced right.
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Great comment, love the design of the site too.
2007-2009 have been crazy years for investors. I’m hoping for less turbulence in the markets next year, especially as the Fed’s quantitative easing ends and market forces take over. We won’t know until 2010 comes, though… Btw, where can I subscribe to your feed?