Recognizing A Selling Opportunity
FRENZY: Intense usually wild and often disorderly compulsive or agitated activity
A: From January to May of 2005 the NYC housing market experienced a frenzy due to the lack of available inventory, rising lending rates signaling the beginning effects of Greenspan's monetary policy to slow the economy, and the sudden surge in buyer demand to lock in morgages which powered 7 out of 10 deals into bidding wars. Looking back, homeowners trying to sell now should realize that in 'times of frenzy' is when you will get top dollar for your property! Will greed kick in and cloud your investment vision the next time the 'frenzy' hits NYC real estate?
Selling today? Then you missed the top! Your NOT the best, and despite everything your broker or friends have told you chances are your apartment is worth a bit less than you would like. Buyers do have control in this market and will negotiate! Should you have sold? If so, than at the very least make sure you learned something!
Once you come to the realization that your apartment may NOT be worth what comparable units were getting 12 months ago, you will be able to get back to savvy investing strategy which is a constant learning experience. Although many homeowners are still pricing their units using comps from the year ago period, buyers just aren't biting! Therefore it's those homeowners offering the best deals right now that are getting the deals, forcing comparable units to stay on the market longer and reduce their price at a later, more desperate time.
If anything seller's should come out of the experience wiser after having lived through the experience of a 'buying frenzy' (JAN-MAY 2005) where the majority of transactions were going into bidding wars from mulitple buyers. The question of the year ago market was, "...how high do I need to go over ask?". The question of today's market is, "...how low can I get this seller down to?".
Not to say it was a bad time to buy 1 year ago, as I've seen a few studio and JR1 apartments recognize nice gains over the past 12 months. Its just that in hindsight you realize that 'buyer frenzies' are the types of times that savvy investors from years ago should lookout for to take profits in! Let me repeat that:
SAVVY HOMEOWNERS BUY FOR THE LONGER TERM AND LOOK FOR VALUE IN TERMS OF THE HIGHEST QUALITY PERMANENT FEATURES OF THE PROPERTY - SUPERSTAR INVESTORS RECOGNIZE TIMES OF FRENZY AND TAKE THE OPPORTUNITY TO SELL AND CASH IN PROFITSIf you bought a 'starter property' in the past year or so (with the strategy of owning then renting/selling) then be sure you remember what the NYC market was like from JAN - MAY 2005; the next time its like that you will want to SELL and realize the gains when buyers pay top dollar due to limited inventory and low lending rates (nyc real estate is cyclical and will rebound in the future). That should be your EXIT STRATEGY as you recognize the selling opportunity and cash out. Until then, you should live in your property and recover from the initial financial effects of homeownership (down payment + closing costs + renovation costs add up). So what if your sacrificing your lifestyle temporarily as you are on the right path to building wealth. After your save up enough liquid assets after taxes look to lease out the unit for rental income and wait to sell when the next buyer frenzy sets in.
Will you recognize it the next time around?
Examples of Savvy Investors Selling During Past 'Buyer Frenzys':
1. Mark Cuban Selling Broadcast.com to Yahoo for aprox. $1B (in pocket) in early 1999.
2. Donald Trump/Hong Kong Investors Selling Land on Manhattan's Westside to Extell/Carlyle Group in Mid 2005 for $1.8B.
