The real estate market, like most
investment vehicles, always goes in cycles. There are times when the
value of properties seems to keep going up and up. There are also times
when it seems the value of properties is going down and down.
Abiodun Doherty |
Each of
these cycles is affected by economic, social and political factors. The
real estate market is an integral part of the society and always
reflects the current or immediate trends in the society. The fact
remains that no matter the cycle, it is either the buyers or the sellers
that would benefit the most. Understanding what to do in each cycle is
something every investor should be knowledgeable about.
When demand for properties exceeds the
number of properties available for purchase then it is a seller’s
market. Sometimes an area begins to attract investors or buyers for
various reasons such as a major infrastructural development that are
coming up nearby. The interest shown in that area could be slow at first
then it suddenly gains momentum to the extent that there are not enough
properties to meet the demand. Once this point is reached sellers begin
to increase the prices of their properties in order to play on the
overwhelming interest shown by investors and maximise their profit. This
is a classic pattern of a seller’s market.
There are also times when the economy
not only slows down but probably faces some challenging times. The
classic pattern in history is when there is a major or series of events
that impact on global or national economies negatively resulting in
closure of companies and job losses. The ripple effect of these events
is that companies re-evaluate their need to invest and governments
embark on cost-saving measures. The overall effect is that the amount of
money in circulation dwindles and this could lead individuals and
corporations into tight economic seasons.
When the economy enters periods of
recession or economic slowdown one of the key indicators that there is a
problem is in the real estate sector of the economy. When companies are
bankrupt the investors or lenders resort to the sale of assets which
generally include real estate. When individuals are looking for ways to
raise money they usually consider selling assets which generally mean
properties. When individuals lose their jobs or their businesses are
bankrupt the only way for many to avoid foreclosure on their mortgages
is by selling their properties.
The more properties that are available
for sale in an economy with less money in circulation, the more it
becomes a buyer’s market. Once supply has exceeded demand buyers begin
to shop around for bargains since they now have more options .In a
buyer’s market, many properties for sale stay longer before receiving
any serious offer and during the waiting period more properties with
similar or better advantages are also brought to the market for sale.
Under such circumstances, sellers that are under pressure for money will
usually become more flexible with price thus indirectly forcing other
sellers to reconsider their selling price.
In a buyer’s market, you need to adopt a
proactive approach to marketing your property. The more you are willing
to work within the bounds of reality the better chance you have of
selling your property faster than the average turnaround time. Due to
the intense competition for less money in circulation, it is best to
engage professionals to help you manage the process. Sometimes the big
firms may not be the best because many of them are already overwhelmed
with property briefs. It may be more pragmatic to give your property to a
small or a medium firm who have the drive and passion for succeeding
and would like to impress you with their service delivery.
In addition, you should make the best
effort to put your property in an attractive state. This is not the best
of times to leave a property in a less than average state considering
the competition in the market. While I do not encourage you to make a
significant investment in the property you should consider the little
things that could attract or repel an investor. For instance, when you
are selling a residential property most buyers would be interested in
the kitchen especially when inspecting with their spouses.
Finally, be reasonable with the price
and prompt in your response to offers. This is not a good time to place
an inflated price tag on your property because many investors will not
even take a second look. Find out what the average price is and stay
close to it but be flexible in your negotiation. When you do get
reasonable offers be prompt in responding to them since delay could mean
a lost transaction. Do not allow your ego to interfere with the reality
of the season.
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