by David White
Buying, Investing, & Trading Up
What's the smart real estate move in a slow market with relatively low interest rates (like 2008)? Well, those conditions describe a buyer's market, in which the optimal decision for a real estate investor or a homeowner desiring a more valueable home is to trade up and be sure not to overpay. The reasons for this are very straightforward:
It's always best to have the negotiating leverage on your side when you are contemplating a transaction. In a buyer's market, sellers must compete for the buyer's business. A buyer represented by a Realtor who is also a good negotiator has the best possible chance of getting an excellent price and terms in a buyer's market
The less demand for properties, the more properties there will be to choose from, and the better the opportunity will be for a buyer to pick and choose among those properties. It's simple - - the buyer has less competition in a buyer's market
Obviously, when interest rates are relatively low (as they are now), the buyer's monthly outlays will be considerably less than when rates are high.
The three points above apply to homebuyers or investors whether they already own a property or not. For those who do already own a property (and don't plan to hang onto it for investment purposes), a buyer's market is the right time to trade up to a more valuable property. This is because the benefit of the buyer's market derived on purchase of the more expensive property will be greater than the detriment of the buyer's market on sale of the less expensive property. Example: Moving from a $1.0 million home to a $1.5 million home, with 10% impairment in value of each during a slow market, yields $150K savings on purchase of the new less $100K impairment on sale of the old = $50,000 net benefit of trading up).
Therefore the buyer's choices are maximized, while purchase price and ongoing payment costs are minimized, buy purchasing or trading up in a slow ("buyer's") market.
-June 2008
No comments:
Post a Comment