Is it a Good Deal?

You hear about them everywhere. The TV is constantly telling you about the wonderful deals available; it’s all over the Internet - check here for your complete list of foreclosures, auctions, etc., newspaper ads tell you to  buy your property for pennies on the dollar. (Is that 50 pennies on the dollar or is that 95 pennies on the dollar? Hmm, they forgot to tell you. And is it today’s dollar or the 2005 dollar? Or is it tomorrow’s dollar?) But how do you really find these great deals everyone is talking about?

First we need to define “good deal.” If a house sold for $200,000 in 2004 and it is priced at $200,000 today, is that a good deal? What if it is priced at $225,000 but they will take $200,000 for it? If there was some magic formula that you could apply to tell whether something is a “good deal,” everyone would find it and a couple of years from now, we would have a whole new distribution of wealth. The reality is that it is not that easy, BUT with some research and deligent study, you can make some very, very good decisions about what a property is doing right now and what it is going to do in the future. This is what makes your “deal.”

You need to know your market. In some areas of the country, you can find homes priced at $100,000 that are lousy deals because they’re too high for that particular market. Other areas, if you ask for a home at $100,000, you will be laughed out of the state – they don’t exist. Let’s say you are in an area with homes that are in that range. Why are they in that range? Not only do you need to look at the market today, you need to look at what happened yesterday and what is expected to happen tomorrow.

If the area has experienced significant unemployment and the employment base is not expected to come back, you need to think twice about homes at any price. Are people moving into the area or are most buyers relocating in the same area? Are they seniors that are moving down or young families that are moving up to larger homes? How many small businesses are going out?   Are new businesses starting up in the area? Are people buying things like cars and furniture or are they scared to spend money on anything they don’t absolutely need? These are all indicators of what may be occuring tomorrow.

Environmental features will keep some areas strong regardless of what the rest of the country is doing. Industrial hubs have a tendency to experience less negative downturns. Some cities are hubs for traffic of goods and people. There will always be employment in these areas and they will likely not experience as large of cycles as some other areas.  The weather in some areas will draw people like a magnet. Some areas are blessed with natural beauty and resources which will help ensure future stability.They may experience bad times but as things start getting better, these areas will hold their own.  Most, but not all, college towns bring life into a city.

When you look at all these circumstances you will see one similar thread. There either is the availability of employment or the future prospect of employment for people. That is the single most important ingredient to look at when evaluating the vitality of an area.

If the average selling price was $150,000 three years ago. are they still in that range, have they come down but seem to have leveled out; or are they still coming down? Now don’t get caught in the viscious cycle of trying to wait until the market hits bottom. You will never know when it hits bottom until it has started up and then, again, it’s too late. The problem now is that you are competing with everyone else who has discovered they waited too long. By carefully evaluating the market, you can see if things were plummeting for six months or a year but then price decreases started getting smaller and a few sales started occuring. The market is still bad and, overall, homes are selling for less this month than they did last. Sellers are more desperate than ever and they’re reducing prices yet but a home is selling here and there and they’re selling for 95% of asking price rather than 92% of asking price. The market has only gone down 1% over the past two months  rather than 5% decreases experienced three months ago. By keeping an eye on the stats you have much more opportunity to pick up a good deal. Yes, values may still go down slightly overall, but if you purchased yours right, you can afford for that to happen and still come out okay.

Use the help of a good experienced Realtor who stays up with market trends to help you evaluate what is happening in your market. Don’t try to get the deal of the century. Don’t follow every gimmick and come-on that you hear. Just get  professional, sound advice and find the sensible deals that will pay you good dividends over time.

For more information or individualized assistance about finding the good deals, Contact Us.