Real estate as a commodity

The real estate business is perhaps one of the most competitive service industries there is. I clearly remember my first day in real estate school when the instructor said "he/she who controls the inventory, controls the market". We're conditioned from day one to do three things; get listings, get listings, and get listings! There's nothing about this notion that is necessarily untrue, and as a matter of fact I have benefited personally by concentrating on building up an inventory of properties in a certain subdivision. Some of my most successful ccolleagues are indeed those who have been able to carve niches for themselves, whether it be in a neighborhood, or in a specific type of property.

This intense competition for properties often leads to real estate agents and their brokerages making certain statements and claims, that I've concluded as a result of both training and experience, are simply not true. Don't get me wrong; I'm not implying that there is any intended deception on the part of any real estate professional. We, as an industry, are simply passing on to consumers what we've been taught. Subsequently, we make statements like this, "Our marketing is so effective, that we'll sell your home quickly, and at the highest possible price". The implication being, that marketing can sell real estate. I humbly beg to differ. If this were true then the top three or four brokerages with the most marketing resources would be selling the vast majority of the properties. Even the top dogs in their own markets can muster, a most, a 10% market share at best. There is no doubt that having a far reaching, comprehensive marketing mix is absolutely essential. However, not for the reason that most of us think.

The not-so-evident truth is that marketing never has, and never will sell a single piece of real estate. Marketing can sell products; marketing can sell services. Real estate is neither a product nor a service; it is a commodity! And by loooking at commodity markets, how they work, and what motivates buyers in commodity situations, we will go a long way to understanding, and further educating home owners on how to maximize profit from the sale of their homes-regardless of market conditions!

Look before you leap

You've been looking to buy a condo, and what a great time it is to do so. There's never been such a vast selection of attractively priced properties out there. Naturally, you've already had your mortgage pre-approved by a reputable primary lender, you call your agent, they start emailing you properties, and you're set to GO! Right? Not so fast. Chances are if you're a middle class average American you're going to take advantage of the "back by popular demand" FHA loan. Well....the truth of the matter is that not all condo complexes are 'FHA approved' and the last thing you want have happen is to fall in love with a place only to find out later that your lender will not finance it. How can you avoid this? You may ask. Here's the answer:

https://entp.hud.gov/idapp/html/condlook.cfm

And it will make it possible for you to look before you leap!

Some positive news about Commercial real estate

Commercial real estate might not go bust

NEW YORK – June 9, 2009 – In spite of all the recent gloomy talk, the U.S. commercial real estate market might not endure the belly flop everyone seems to anticipate.

The reason? More real estate investment trusts (REITs) have been warming to the concept of deleveraging in recent months, raising approximately $12 billion of equity in the stock market to either fortify their cash positions for the months and years to come or simply to pay off debt.

Analysts expect that the ability of high-profile real estate owners like Brandywine Realty Trust, Highwoods Properties Inc., Forest City Enterprises, and others to raise capital in such a difficult lending environment will help the overall stability of the commercial real estate market. As a result, fewer buildings will have to be sold at bargain-basement prices.

Source: Richmond Times-Dispatch, Andrew Little (06/08/09)

A feeding frenzy

Have you tried to buy a foreclosure in the $100,000 to $150,000 lately in Miami Dade County? Then you know can certainly relate to the "feeding frenzy" that's currently happening with these properties. Homes in this price range are flying off the market in a matter of days and are selling at, or above, list prices. If you plan on going after one of these, and you want to have a fighting chance of getting it, do NOT bid any less than 95% of the asking price. I am currently working with a number of buyers who have lost out on properties for not heeding this advice. Case in point; a property in Hialeah Gardens went on the market last Saturday for $150. The buyer offered $140 on Sunday. Monday was Memorial Day. On Tuesday, the seller had 33 offers! Needless to say, this property will sell for more than the asking price. Unfortunately, many buyers will lose at least three properties by bidding too low. If you want to save yourself a lot of grief, listen to your agent and BID AGGRESSIVELY!!!

What is Area 20 anyway?

Area 20 is the area that my office services. It includes West Hialeah, Hialeah Gardens, Miami Lakes, West Miami Gardens, and Palm Springs North. And yes, there is reason to be optimistic about the real estate market in Area 20.

Months of inventory based on closed sales sales declined from 43.4 in April 2008 to 15.2 in April 2009. In other words, we have less than half the inventory of unsold homes on the market then we did a year ago. The lesser the inventory the quicker we get to the tipping point where demand we be in line with supply, and when prices will stop depreciating.

Comparing April 2009 to April 2008-the number of new listings declined 31.5%, the number of closed transactions increased 95.9% and the number of properties going under contract increased 185.9% (if we look at this same figure from January of 2008 the increase is even larger-245.3%). This is Huge!

If you're selling, then these stats prove that there are many buyers out there, and as long as you're priced competitively, YOU WILL SELL. And if you're considering buying, then rest assured that if this level of market activity continues, prices will stabilize sooner then later. Your opportunity to negotiate a good deal is NOW...

A 200% Improvement...

I'll keep this one short. In Area 20, which is the area that my office services(Miami Lakes, West Hialeah, Hialeah Gardens, Pine Springs North), Pending Sales are up over 200% over this time last year. In other words, we have over 200% more properties that are under contract for sale. This is an awesome improvement in market activity, and an early sign that there is light at the end of the tunnel. While we still have many months of inventory to absorb we are seeing the early effects of low rates, great prices, and first time buyers taking advantage of the $8000.00 tax credit.

Inflation's effect on your buying decision

Regardless of one's opinion of the recent financial bailouts, the fact is that they are happening, and by all indications will continue to happen. We're simply printing paper! Everyone knows it. And the end result of printing all of this money will be inflation. It is the inevitable result of overprinting money. In inflationary times, cash, bonds, and stocks do poorly. Only two investments thrive: precious metals like gold, and real estate. When inflation hits the Federal Reserve will raise rates to keep it in check. This is their only method of controlling it. The worst case scenario is stagflation, where we have low growth AND high inflation. We had this in the 70's, and stocks performed poorly that decade as a result. However, anyone who bought a home in the 70's can certainly attest to the fact that their property is worth a lot more today. When this inflationary cycle will arrive is a matter of debate, yet it will arrive! Hence, we are sitting on the very best opportunity to buy a home for many years now:

• Rates are at historic lows-when inflation arrives they will be high. By 1981 rates were at 18%
• Sellers are motivated to sell
• When inflation returns, the smart money will move back into real estate. Subsequently, sellers will have more options and will be less inclined to negotiate their asking prices.

In short, RIGHT NOW you can negotiate the best price, with the lowest rates, and hedge against the coming inflation. There is no other investment with all of this going for it. And let's not forget the tax write-offs!

Could I be wrong? Sure! Yet the above mentioned scenario is not only plausible and likely. It also has a historical precedent. Our economy moves in cycles, and it would be fool-hearty to think that inflation will never come back. It is the likely result of printing excess amounts of money.

I short, the case for buying now is simply overwhelming...