What is TRUE Value?
I think the consumer is confused, and rightfully so. The media keeps telling people that it is a buyer’s market, and it is. But, what exactly, does that mean? Well there are so many issues that relate to now being the right time to buy, but really, at the end of the day, isn’t this as much, or more, about what you should buy and what you shouldn’t buy, as it is timing?
Don’t get me wrong, timing is on your side, if you are looking to buy a home today. You can now afford to buy a better home in a better location, than you could in the past. But now for what to buy…well, there are, and always will be what we call the “Walmart” shopper. These are people who buy because it is ON SALE, or “Cheaper”…and we are glad those people exist, because they are the perfect candidates to help remove some stagnant inventory off of the market, and reducing the supply and thereby increasing the demand.
Let’s examine this phenomenon though, the truth is, you get what you pay for, and today, with pricing having come down on land, labor, and materials, you can get quite a bit for what you pay. But let’s not confuse “left over”, distressed, and foreclosed homes as the only great bargains to be had out there…they just aren’t. This is a good link to check out if you are considering a foreclosed or distressed home: http://realestate.msn.com/article.aspx?cp-documentid=17887493&page=2.
People are still buying homes, and some of them are looking for the “deal” and will buy whatever they perceive to be “on sale”…funny enough, I had an agent, on a newly built home in a stellar community, tell me that we just weren’t offering enough of a “deal”, so I said, “If I had priced this home $100,000 higher, and given them $100,000 off the purchase price, to get the the EXACT number we are working with RIGHT now (the not good enough deal), would it be a good deal then?”. She laughed and then said “YES. They would love to have a home that they got $100,000 off on”. WOW. OK. Well, I would rather just price the home for today’s market conditions from the start, and that brings me to the real point of this discussion, which is TRUE VALUE.
When evaluating a property, even if it is the “Deal of a Lifetime”, there are some things you should consider:
1) Why hasn’t this home sold? If it is new construction, it was likely over priced to begin with and/or built for the investor frenzy that was 2005 and therefore had little thought paid to live-ability of the floor plan and quality may be lacking. Frankly, the homeowner is looking for something different in a home then a home buyer that is planning to buy it (sometimes sight unseen) and flip it for pure profit.
2) Let’s talk about quality. What is the neighborhood like? How will it age? Will my home/community loose value or appreciate at or above market apprecaition? How have other communities by this developer weathered, both visibly, and in terms of preserving or increasing home values? How about the builder, what do other home owners have to say, how do their homes weather? Building codes changed in 2008 calling for more energy efficiency, homes “left over” will not have those advantages. Subcontractors are in desperate need of work and their top guys, sometimes the owners of the companies themselves, the most skilled laborers are now on the job, and since they have time, they are taking their time and getting their craft right, they want to be called back to do the next job. Quality is at an ALL TIME HIGH for homes built in 2008 and sooner.
3) Foreclosures typically go for 10-15% below market value, this number has been true for many years, the only difference is that there are more of them today. Most of them will require some investment to bring them up to “market condition” (you are paying less because you are getting less). Foreclosures and short sales are sold “AS IS” and the bank will make you sign a disclosure telling you that they have not seen the home and make no warranties. You don’t know what you are getting, and they do not know what they are selling. Foreclosure is a long process, if a person does not have enough money to make their payments, how likely are they to be doing regular maintenance or needed repairs? They know they are going to be loosing their home, taking care of it for the eventual owner (the faceless people at the bank who would not work with them to keep their home) is not typically high on the list of priorities. There may be better “deals” out there if you do a little research.
With land, labor, and materials prices so low, buyers can buy better homes in better locations than ever before. New homes, built of the newst materials, the highest quality, in the best locations, previoulsy unattainable by many, are priced for the masses. Homebuyers can now have custom homes built at prices previously only available in production housing.
At the end of the day, TRUE value is getting a home that fits you in a community that fits your lifestyle, at a price that you can afford. This is the biggest investment you will make, and with the economy the way that it is, chances are, you’ll be staying a while. Get the Perfect house in the Perfect location, because that is the Perfect deal.