A bit more on Value Buying in today's real estate market.
We are like lemmings, we humans. If 25 people stood in Times Square looking up at the sky, within an hour there would be 1000 other people joining them. "The Wisdom of Crowds" was published a couple of years ago and the main premise is that buying a stock that has created the Perception of a winner may be the best strategy for those who don't want to do the work to figure out the underlying value of a company prior to purchasing their stock. Just buy what the crowds are buying. Hopefully, not too late in the "cycle" of growth of the stock price.
The same is true of most buyers of residential real estate.
"Honey, I want this house (because there is a crowd around the block) waiting to see it" - scene from 2005 Open Houses
So, what is the perception now? In many markets, including my own SF Bay Area market, the perception seems to be that things are "bad" and they will "get worse" before they get better. that's the agents' perception! Many buyers think that prices will plummet before 2007 is over, and that there is nothing to be gained by looking seriously at buying now. Let me say that there are good values out there and you can all wait till the interest rates rise before you buy, but I'm buying now - so are my clients. We are not buying like buyers bought in 2004-2006. No urgency. But we are looking for the value in the market and we will find it. We are not waiting to benefit from the bad fortune of others, nor ignoring the law and buying properties from defaulting owners at pennies on the dollar. We are buying value. Decent neighborhoods that are positioning to get better. Look for the places that good retail stores like Starbucks are opening new locations - How about LaFarine in the Laurel district of Oakland? These companies have done their homework - they are buying in Value Neighborhoods. Look for good architecture - maybe a little down on its luck. Look for good floorplan. Look for good lot size. As our population continues to grow, and as more and more homeowners will be forced to buy in denser areas, lot size will mean "alot" - sorry for the pun. Go out looking on a rainy day. That is the best time to go value home shopping. Enough preaching...I just want our clients to be the smartest buyers and sellers in the market. Oh, by the way, the agent that thinks "things are bad and they will get worse" is probably not the best value buyers' resource. More later...
Tuesday, February 20, 2007
Wednesday, February 14, 2007
Value buys
There are plenty of agents and brokers out there who will tell you it is a great time to buy, but they may not know why. It is only a good time to buy if you do it with the perspective of the cycle of the market. The market has just said, loud and clearly, affordability is at a critical point - enough already! The loud sound of screeching brakes has become clear to all but some intransigent sellers. (does this remind you of the Nov 06 elections?)
The California Association of Realtors membership was up 63% from 2000 to 2004. Egads, that means one in 50 adults in California is a real estate agent. It has become harder to get a drivers' license than a real estate license. So what does that mean for the buyers and sellers who are ready to deal? It means that the well prepared buyer and the realistic seller will love this market. The agent who does not hone their negotiating skills on behalf of buyers will suffer pain. The sellers who will not read the tea leaves of change will be lonely and their patience will be tested.
Do your homework. Decide what kind of buyer or seller you are:
Do you want to buy because you couldn't buy in the crazy sellers' market and now you think you can buy something that you would want to live in? Maybe in a better neighborhood? Maybe a good investment?
Well, you are probably right, but it takes strategy and you doing some initial investigation is the most important part. More later...
Do you want to sell because you have to sell? You need a good broker much more than the buyer does right now. You need to make your house accessible and price it so it is the best buy among its peers. Get a good broker and double check their research and comparables. Once you find one you trust, trust them. There are lots of good brokers out there - especially in the East Bay cities that I know of...Berkeley, Albany, Kensington, El Cerrito, Richmond, Pinole, El Sobrante and Oakland. There are some stinkers too. Trust your instincts and trust your friends' referrals.
Do you want to sell because you think you can command more than a comparable house on your street received last year at this time? Forget it.. this is not the time that your strategy will work. Last year's market rewarded that behavior, this year's does not. Brokers cannot pull rabbits out of their hats. Wait for the cycle to move on.
Buyers who buy now can be described as Value Buyers. If you have ever invested in the stock market, the Value Buyers buy good company's stock when the company's stock is not in favor and does not reflect the true value of the company. You look at the underlying value. The same is true for the Value Buyer of 2007. You want to be a Value Buyer of real property because you are not betting on a huge short term appreciation to make your investment good. You are betting on the underlying value of the property. You want to make your money on the buy. Then, however long it takes to cycle to another hot sellers' market, you have made your money. How do you identify the Value Properties?
I always want to buy from someone who has to sell. I don't want to buy from someone who has alot of options - like if I don't get my price, I will just rent it. In a Berkeley investment property, I want to buy from the owner who is so sick and tired of Rent Control and being a landlord that they are in a selling trajectory. I want a get me away from these tenants attitude. I want to buy investment property from someone who has not managed it well. My management can improve the cash flow with little or no investment of further cash.
A house with good bones is what I want to buy now for a value buy.
Good bones means a well designed and quality built home in a pre-transitional neighborhood. A good floorplan is important. I want to be able to understand how I can live in a home and the floorplan is my first instruction. Secondly, I love to be able to see from the living room to the back yard - a look through - is what I call it. Separation of spaces - primarily separation of common areas from bedrooms. Lots more, but those are the most important. Good outlook from the windows. I don't love looking into someone's bathroom or bedroom or living room as if I could touch it. Good drainage means the world to me. A basement is a plus. More later.
I will describe some Value Buys in future entries and tell you what makes them values. That's all for now. Liz
The California Association of Realtors membership was up 63% from 2000 to 2004. Egads, that means one in 50 adults in California is a real estate agent. It has become harder to get a drivers' license than a real estate license. So what does that mean for the buyers and sellers who are ready to deal? It means that the well prepared buyer and the realistic seller will love this market. The agent who does not hone their negotiating skills on behalf of buyers will suffer pain. The sellers who will not read the tea leaves of change will be lonely and their patience will be tested.
Do your homework. Decide what kind of buyer or seller you are:
Do you want to buy because you couldn't buy in the crazy sellers' market and now you think you can buy something that you would want to live in? Maybe in a better neighborhood? Maybe a good investment?
Well, you are probably right, but it takes strategy and you doing some initial investigation is the most important part. More later...
Do you want to sell because you have to sell? You need a good broker much more than the buyer does right now. You need to make your house accessible and price it so it is the best buy among its peers. Get a good broker and double check their research and comparables. Once you find one you trust, trust them. There are lots of good brokers out there - especially in the East Bay cities that I know of...Berkeley, Albany, Kensington, El Cerrito, Richmond, Pinole, El Sobrante and Oakland. There are some stinkers too. Trust your instincts and trust your friends' referrals.
Do you want to sell because you think you can command more than a comparable house on your street received last year at this time? Forget it.. this is not the time that your strategy will work. Last year's market rewarded that behavior, this year's does not. Brokers cannot pull rabbits out of their hats. Wait for the cycle to move on.
Buyers who buy now can be described as Value Buyers. If you have ever invested in the stock market, the Value Buyers buy good company's stock when the company's stock is not in favor and does not reflect the true value of the company. You look at the underlying value. The same is true for the Value Buyer of 2007. You want to be a Value Buyer of real property because you are not betting on a huge short term appreciation to make your investment good. You are betting on the underlying value of the property. You want to make your money on the buy. Then, however long it takes to cycle to another hot sellers' market, you have made your money. How do you identify the Value Properties?
I always want to buy from someone who has to sell. I don't want to buy from someone who has alot of options - like if I don't get my price, I will just rent it. In a Berkeley investment property, I want to buy from the owner who is so sick and tired of Rent Control and being a landlord that they are in a selling trajectory. I want a get me away from these tenants attitude. I want to buy investment property from someone who has not managed it well. My management can improve the cash flow with little or no investment of further cash.
A house with good bones is what I want to buy now for a value buy.
Good bones means a well designed and quality built home in a pre-transitional neighborhood. A good floorplan is important. I want to be able to understand how I can live in a home and the floorplan is my first instruction. Secondly, I love to be able to see from the living room to the back yard - a look through - is what I call it. Separation of spaces - primarily separation of common areas from bedrooms. Lots more, but those are the most important. Good outlook from the windows. I don't love looking into someone's bathroom or bedroom or living room as if I could touch it. Good drainage means the world to me. A basement is a plus. More later.
I will describe some Value Buys in future entries and tell you what makes them values. That's all for now. Liz
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