At the time I’m writing this, it appears the market is cresting. We have had a pretty considerable increase in property values for the past five years. The growth hasn’t been overheated or exorbitant, but is has been steady, representing about a 50 percent increase from the lowest 2008 Recession values.
What does that mean for you? If you want to sell, now is still a good time. Keep in mind that if you sell at a slightly diminished price, you’ll also buy at a slightly diminished price, so it all comes out in the wash. The factor that makes this a great market (for buyers and sellers) is the continued low interest rates. I know I sound like a broken record when I talk about how incredible these interest rates are, but if you compare today’s rates against historical averages, you’ll see today’s rates are a bargain and I don’t think they’re going to last.
I know I’ve been saying rates are going to rise for several years now, but according to my crystal ball, I’m right this time. I can tell you, as a lender, I try to keep my loans to a maturity of five years or less. While I expect an increase in rates, the entire increase will not occur in the span of a few months. So, if you have an opportunity to buy real estate with the intention of holding it for a more than a few years, and you purchase it with long-term, fixed-rate financing, I believe you’ll be happy.
I am not recommending you throw reason out the window and buy whatever is available. I am suggesting that if you find a property you like for a price you can afford and feel good about, the benefits of home ownership and/or real estate investment are worthwhile.
So, as the market shifts from a seller’s market (average time a residential property remains on the market is less than 90 days) to a buyer’s market (average time on the market is more than 90 days), remember buyers and sellers are still interested in making transactions happen. If you’re a seller, it can be tempting to list your house for what it was worth a few months ago, but don’t. Overpricing your house will actually result in a lower sales price most of the time.
If you overprice your house, several things happen. First, buyers who could afford your house if it were priced properly won’t even schedule a walk-through. Buyers who are working with a good Realtor will also avoid your property, because most Realtors can spot an overpriced house a mile away.
Second, as your house sits on the market, people see the listing week after week and may assume there’s something wrong with it. Before buyers make an offer, they often ask, “How long has the house been on the market?” If it’s a new listing, they may assume they have to make a great offer or it will be snatched up by somebody else. If it’s been on the market a long time, they may believe you’re desperate to sell—putting them in the driver’s seat.
Finally, even if you find a buyer willing to pay too much, they may not be able to get financing. If your house appraises for less than the sales price, the bank probably won’t loan the buyer the money they need to complete the transaction.
To combat all these factors, sellers who overprice their houses at the outset end up reducing the price to below market value, reducing their revenue from the sale. So, the moral of the story is, don’t be greedy or you’ll lose out.
If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.