Housing Slowing; More Interested Buyers
A: Its the focus of most contrarian thinking; that is buy when a sector is out of favor and down with a medium term forecast for appreciation. No one can pick the exact bottom, but you can look for deals if you understand how to spot them. So what makes a good deal and something to jump on in this market? Lets discuss.
I wrote about Contrarian strategy a ways back to point out the main aspects of this investment school of thought. When it comes to housing though, an illiquid investment because of the time it takes to sell a home and the transaction fees associated with the deal, you must make sure that you are buying a new property for the right reasons and NOT just because a deal pops up. To start out, the right reasons to buy would include:
1. A stable job (without the possibilitiy of relocation) with rising income that you see yourself at for the next 3-5 years
2. Thinking ahead to a home that you can grow into for the longer term
3. Saved up financially to be able to afford the initial costs of home ownership (i.e. closing costs, moving costs, mortgage + taxes + maintenance costs)
4. You are happy with the town/city that the home is in
These are some powerful reasons to buy a new home rather than rent. But how do you spot a deal? In order to spot a deal you must first gain PRODUCT KNOWLEDGE.
Your buyer broker should already know this, but if you are working on your own product knowledge of your price point is extremely important. Not only do you have to be able to know what you can get for your budget, but you will need to know how to spot a deal when one pops up that can be moved on very quickly!
In real estate training with Citi-Habitats, they talk about placing buyer clients into categories:
'A' Buyers - Buyers whom are educated on their price point and have been looking for a while. These buyers are the most ready to go and will jump on a good deal when it is found. 'A' Buyers should gain a broker's highest priority especially after months of working with these clients.
'B' Buyers - Buyers who are 1-2 months into looking for a new apartment but aren't quite ready to go. These buyers are still in the education process of buying a new home and are about halfway between 'C' buyers and 'A' buyers. 'B' buyers quickly move up the scale to 'A' buyers after a month or so of solid showings and will be loyal to their hard working agent that spends the time with them.
'C' Buyers - Buyers who are just starting to look around, have some time before they need to buy, and are really uneducated about what they can afford, what is out there, and spotting a good deal. These buyers require patience on the part of the real estate agent who makes their annual salary on commission alone. 'C' Buyers are considered in the industry the worst type of buyer to work with, although I do not agree. To me, 'C' buyers are the easiest buyers to work with and become the most loyal over time. Start out through emails by sending these buyers listings with excerpts to educate them on why one listing might be better than another.
Which buyer would you classify yourself as? If you do not classify yourself as an 'A' buyer (again this is an industry set category for agents), than how will you know when a good deal presents itself?
Bottom Line: Get product knowledge by researching all properties in your price point and visiting open houses on your Sunday's! Try to see at least 10-12 properties in the first few months of looking which should give you the experience needed to spot a good deal in the future!
SPOTTING A DEAL
Look at the main 3 aspects of housing that I talk about all the time here on UrbanDigs and then compare the PPSF (price per square foot) with recently sold's in the building to evaluate the desperation of a seller.
The 3 main aspects of housing that take priority remain:
3. Raw Space
This should be your focus, with all other apartment/building characteristics following suit (i.e. renovations, a roofdeck, gym in building, etc.). When you spot a property that meets your needs and wants, you normally move on to price evaluation next to see if the apartment is priced right and worth a bid. Thats exactly what you should do now except you need to find out RECENT SALES for this particular building as well.
Ask your broker or look at PropertyShark.com to try and find the last sales in the building and then compare to what this property is asking. Lets do an example:
245 East 93rd Street (a luxury full service building in the UES) has a large 1,494 sft 2BR/2.5BTH apartment on the 11th floor listed for sale at $1.195M. Details:
245 East 93rd Street; Apt 11H
Size: 1,494 sft
RE Taxes: $820
Views/Light: City & River Views with N/E exposures
Now lets look at the last comparable unit sold in the building to evaluate current pricing. The last units sold were:
Size: 1,400 sft
Closing Price: $1,125,000
Closing PPSF: $804
Size: 1,300 sft
Closing Price: $1,125,000
Closing PPSF: $865
CONCLUSIONS: The current ACTIVE 2BR/2.5BTH apartment at 245 East 93rd street has been on the market only 2 weeks but is priced right and below the last 2 comparable sold in this building! Obviously the eventual purchase price will be even lower with a negotiation making this listing a good deal for a new family seeking space to grow into at this price point!
Do the same work for your price point and for any listing that looks like a good deal to you and you should be just fine! And remember:
AS HOUSING SLOWS SAVVY BUYERS GET MORE INTERESTED TO SCOOP UP THE BEST DEALS