Thursday, July 3, 2008

What's the Real Value of your home today?

I'm looking at all the properties on the market right now in my area of FL and I keep wondering when changes will come...not anytime soon.

I don't need to keep reading how the media interprets whats going on in the Real Estate market. I already know what's going on. I'm a Realtor®....I better know whats going on or I might as well just get out of the business.

I'm primarily a listing agent so my job can be very difficult these days. I remember when taking a listing was easy. You take it and it virtually was sold overnight. It didn't matter what the size was or what the condition was or even where it was located.

Now when I go on listing appointments I'm finding it even harder in some areas to pin point the actual value of the property. I find myself turning down more and more listings because I refuse to waste my time and a sellers time with false promises. CMA's can be difficult to prepare in a neighborhood that hasn't had a few sales let alone one in the last 2 years. I'm even finding myself using a few more pending sales just so I have something to show them that justifies today's value.

I will start off by only going back over the last 90 days. It makes no sense to go back further but sometimes I'm forced to look back 180 days because I simply can't find anything to support the sellers premise of value. Even 180 days back you still might not have anything to support your findings and that makes my job even harder.

I took a condo listing from a referral my partner had....the seller wanted it listed at $239K. At that time I told the seller that according to my figures it was only worth $185K. They refused to "give it a way" and that's their prerogative but it's still listed today and has been repositioned in the market guessed it...$185K. Here is the problem...we have only had two showings in total and now the properties value should be at $150K. So what happened? They just wasted almost two years and they finally gave but now that price point no longer exists.

Right now in my area there is about a 5 yr supply of condo's/townhomes and about a 2-3 year supply of single family homes available. Those figure just tell me how many sellers are waiting on line to sell.

So how can you justify today's value? In most places you simply can't. When your market is flooded with over 40,000 homes just in one county the consumer is looking to see how much they can get for their home but it seems they are generally looking at how much the homes in their area are selling for and not what they sold for. Many times I will walk into a listing appointment and before I can pull out any information to justify the value...the seller throws a number at me that is not even close to what I think the homes is worth today.

I will usually inquire how they came to that number and I get the same story most of the time. The consumer usually doesn't look at closed sales over the last 90 days. They are looking at asking prices but what your asking doesn't tell us what your really going to get.
I've seen homes asking $750K that ended up selling in the end for $400K. So how can you justify the first price point if it ends up selling for $350K less? Another problem is you list to sell ratios....if that example above were to sell the ratio would reduce the neighborhoods values even more when the next home goes on the market.

The house down the block is not as nice as ours so I think it's worth X. They don't realize that most homes that are sold will require some sort of financing and if it doesn't appraise then they just wasted their time.

It doesn't matter what I think it's's what the buyers and sellers are negotiating in todays market place. Even if I say that X is what your value is they still don't realize that this is today but in 30-90 days from now it probably will be worth less in this market so catching up to the market is a bigger problem right now. By the time it hits the market....5 others come on for less or a few might close for less.

Right now I'm only looking to get some warm bodies to want to see these properties. If you aren't receiving a call to see it then most likely it's on Pluto. I have properties that I have listed right now at really reasonable market values that aren't getting much activity.

These are just a few things that could be happening :
Not many buyers looking in that price range
buyers in that price range simply aren't qualified for loans
buyers are reluctant to purchase a home with less than 20% down in case they lose even more equity in the home
Sellers still can't accept the fact that they most certainly won't get their price no mater whay we do.
Banks aren't lending money unless strict guidelines are met on these specific properties
Too many others that are simular or are bigger for the same price.
Buyers are still wating for a better deal
Buyers are spending a lot more time looking before pulling the trigger.
Price per square foot just isn't working in my area. If you look back during the Real Estate'll find that most buyers didn't care about that formula but they still couldn't figure out how two of the same exact homes were selling at such a different spread. So how can you justify it today? You can't. It was a domino effect. When one house would sell without the contingency of the appraisal then the next house can sell for the same or even more. So every time another home sold for more...the neighbor would try to get even more thus we have ourselves an inflated the same thing is happening in reverse.
How about all the builders who were selling new homes and the price per square foot just didn't make sense. How did all these homes appraise? What about all the speculators who bought a year ago only to find out that they can't even sell the home after it close with the builder because the builder valued it too high and the buyer is stuck with it?

Today's value are kind of like the saying...ok so now what have you done for me lately.
How many times have your clients called you and asked you you when is the market going to change or whats going to happen to the values. Are they going to still decrease or are they going to increase or are they going to level off? If I could give everyone the rigbht answer I'd be a millionaire.

Market correction takes time and there is simply no way to pinpoint the exact time it will take. Remember people were saying the bubble would burst for 5 years and so now it did. Well when will the bubble grow again...there is no way to tell how long or even if we will ever see the market we saw 5 years ago.
For more information please contact Neal The Real Deal Bloom-Realtor® /Remax Premier Assoc.

2500 Weston Road ,Suite 103
Weston FL 33331
(954)608-5556 Direct(954)212-0257 Fax


Toronto realtor said...

Well done on this post Neal. You see, I have the same problem here in Toronto. Lots of houses to sell, but seemingly no buyers. And I know they are there. I`m a realtor in Toronto" and I have lots of experience, but some clients expire just because they have no idea about the prices. It`s just that lately the prices soared so they think they can push theirs too, but they don`t know that the buyers can`t afford.
I hope that your post will give them some insight and reason.

Nealb63 said...

Rganks for stopping by and reading Julie!

Brazil property said...

Great work Neal.
The problem is same all over the country. The sellers are trying to get more from their home and buyers are trying to make a good deal.
Increased foreclosures and short sales make this more worst. There are so many houses in sale listing that buyers are confused what to buy and what not?