The Real Estate Market in 2006 (For Buyers)

Many individuals and investors buying real estate in 2005 and still owning the property had a bruising year in many markets albeit not all. Many got caught up in a seller's greediness and overpaid the true market value. Some found themselves in a multiple offer auction trap and ended up paying well above the original asking price for the property. Or new construction was purchased that was on a builder's spec list and subject to continuing price increases unrelated to increased costs. The rationalization for many buyers was "who cares" the market is spiraling upward and when it comes time to sell, all will be well, we hope... Investor Owned Real Estate The evidence continues to mount that a correction of sorts is afoot in many real estate markets. Investors and real estate agents themselves who have properties they own on the market are getting increasingly nervous and this is and will translate into lowering prices particularly during the next few months. Keep in mind these lowering prices may well be off of grossly inflated asking prices. Many investor owned residential properties now on the market may have been purchased 1 or even 2 years ago and have been tenant occupied. Typical leases run for one or two years and the property is likely to be put on the market 2 to 4 months from the termination of the lease thereby minimizing negative cash flow. Owner Occupied Real Estate Most homes that are owner occupied and for sale aren't owned by investors or real estate agents. Most states require real estate agents to divulge their ownership regardless of whether they are occupying the property or not. However investors are not subject to the same requirements. Buyer Considerations Once you have narrowed down the number of homes you are potentially interested in it's time to do your own due diligence. 1. Whether you are using a realtor or dealing with a seller directly, find out what type of seller you are dealing with and whether investor, real estate agent or owner occupied. 2. Particularly with newer construction but with any property, determine what the last purchase price was and the last sale date. This information is a matter of public record and most county property appraisers have the information readily accessible on the internet, usually through the county maintained website. The information will include the actual property address and the name(s) on the property deed. Be advised most systems are not maintained real time and there may be a lag of a few months before a recent sale is reflected in the property records. If you suspect the property has been recently purchased and immediately put on the market for sale, call the county property appraiser or tax assessor's office with the exact property address and ask for the latest available information that may not be posted on their website. If you are working with a real estate agent and the house under consideration was previously listed and sold from the Multiple Listing Service (MLS), your realtor can find out the actual selling price. 3. Find out what the sale prices for comparable properties have been in the neighborhood you are considering. Start with the same street and then expand to sub-division and then reasonable proximity to the property under consideration. Here working with a realtor makes this step easy, if not the information is public record however more difficult and time consuming to obtain. 4. Find out what the asking prices for comparable properties are in the neighborhood you are considering. Again, look at the same street, sub-division and a reasonable proximity to the property you are looking at. A key factor here is the days on market (DOM) and what the listing price history has been if on MLS. This information is generally only available to realtors and is not available to the consumer and is not available to realtors or consumers if the property is non-MLS. Also many variations in that a home may have been listed with different brokers and under different MLS numbers and even different MLS systems. 5. Knowing the available inventory of homes on the market in the area under consideration, length of time on the market and recent (over the past 6 months) sales will provide valuable information when formulating an offer to purchase. 6. When considering an offer price, take into account all the due diligence you have done and all the information you have collected. The asking price of the property you are considering can fall into many categories. Grossly overpriced, overpriced, market priced or under valued. The asking price is driven by many factors and obtaining the property for what you believe to be a fair price (to you) should be your ultimate objective.