Housing Market Crisis Opportunity?

Last night I happened to catch an episode of “Larry King Live” which included a feature on the current housing crisis along with a panel of participants including Robert Kiyosaki, author of ‘Rich Dad Poor Dad’, and Donald Trump.

While the stats by now are known to most people – The Shiller Home Price Index was down 15.5% for April ’08 vs April ’07, and over 1 Million foreclosures have been filed with many many more expected, the real overarching questions were a) is this a good time to sell and if you have to sell then what can you do to sell, b) what do you do if you are a homeowner facing foreclosure, and c) is this a good time in terms of opportunities to buy and invest?

The unanimous consent amongst the parties was pretty much as follows

housing market real estatea) This is not a good time to sell obviously and if you do not have to sell then you shouldn’t. If you do have to sell then you can sell if you price your property appropriately. This means first of all IGNORE what other homes are listed for, the only thing that matters is what homes have actually SOLD for recently as a valuation bench mark. If you must absolutely sell then discount your home 20% below current market value and you will find that it sells very rapidly. The bottom line is that it is not that there are no buyers, it all boils down to the numbers.

At our business we have been working diligently for the past 2 years, communicating to our sellers that the one thing that is more important than anything else in determining whether or not a listing will sell is price. We have some listings that have lingered without activity for a year where sellers simply refuse to face the realities of the market, and then other listings that are selling in a week, because in those cases the sellers are realistic and follow our advise. The Sarasota real estate market is what it is and if you ignore market realities then you simply will not sell.

b) If you are a home owner in trouble the resounding agreement was that the very worst thing you can do is ignore the lender when you get your notice. Lenders do not want to own your home, and they are willing to work out loans with home owners and today you have a lot of leverage as a owner in renegotiating your loan. The only predicament today is unfortunately that lenders will not discuss your loan until you are at least a couple of months late. Once you are late however you will find that you have the ability to get the lender to agree to work with you so you do not lose your home.

In our business we are working with a lot of short sales and I do see many lenders making amazing concessions. Some lenders are of course better than others. The worst unfortunately in terms of communicating is Countrywide and it is well possible that Countrywide’s own internal upheaval is contributing to this. Hopefully once the acquisition by Bank of America is finalized this will change.

c) Is this the time to buy? The panelist were in full agreement that we are either at or very near the bottom of the market. And yes, this is a great time to buy, as the best time to buy in any market is when prices are down and everyone is selling.

That being said, the days of real estate as a get rich quick scheme is over. You have to know what you are doing. Just because something is a foreclosure or bank owned property and priced at a seemingly amazing price does not mean that it is a great investment.

I tend to agree. If you are looking to buy a home as your residence then definitely now is the time to strike. Sellers are super motivated and there are a lot of opportunities to snap up a property that simply was unheard of in the past. And 5 years from now your property will certainly be worth more than you are paying today. If you are an investor then you need to understand how to evaluate a property as an investment. If you buy something in hopes of a quick flip then you will get most likely hurt. This is not the time to flip properties.

Overall I felt this was a very informative segment with a lot of optimistic view points. I would love to hear your views on the aforementioned 3 points, particularly with respect to the Sarasota Real Estate Market.

All the best…

Thomas Heimann, President & CEO
Bravo Real Estate Solutions
http://www.bravobrokers.com/