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Tuesday, August 21, 2018

Time to Buy is Now

It is difficult to avoid all of the negative news regarding the stock market, the real estate market and the overall economy. If you are on the internet, watch television or read the newspaper you are inundated with the doom and gloom being reported. There is definitely a lot of uncertainty and fear in the minds of the public when it comes to investing. We have experienced these feelings surrounding the events of the savings and loan collapse, Black Monday, the attacks of 9/11, and the bust of the dot com/Tech bubble. We have experienced fear before and gotten through it. It is in times like this that fortunes are made.

Legendary investor Warren Buffett famously said: “Be fearful when others are greedy; be greedy when others are fearful.”

The market is fearful now and he walked the talk by investing $5 billion in Goldman Sachs late last month.

Donald Trump told Good Morning America in August, “This is the time to start looking and start buying. Over the course of the next year if you don’t do it you’re going to be very disappointed in the years to come. Now is the best time in years to purchase real estate …especially in the next 12 months to get the best deal.”

If you are looking to move up, purchase an investment property or help your children buy a home now is the time. Prices are near or at the bottom, investment properties are finally priced where they can produce positive cash flow and buyers can now buy for less than they would pay in rent. Interest rates have been at a historically low rate and dropped again this month.

The real estate market began declining in late 2005 and continued through 2006. Buyers in 2007 were sitting on the sidelines and trying to time the market and wait for it to hit the bottom. In 2008, the dramatic increase in short sale and foreclosure homes have brought home prices down further. The best homes that are priced right are often receiving multiple offers and selling for more that the list price regardless if they are bank owned or not. More than 30 percent of the sales have been bank owned and the bulk of the homes being sold in our area are under $200,000.

The lenders have become more proactive in getting short sales processed and approved. A short sale is when the owner owes more than their home is worth and they negotiate with the bank to see if they will agree to take less than the amount they are owed rather than foreclosing on the home. At the beginning of the year when the volume of short sales being listed increased dramatically the banks were not ready with manpower and systems to get them processed. Because of their lack of responsiveness earlier this year, short sales became stigmatized by agents and buyers not considering them because the lack of communication and being in limbo as to when they can plan on moving. Buyers and agents found it easier to deal with the bank-owned properties and avoided short sales. We are beginning to see the banks responding to short sales quicker and getting them closed, this may get buyers and agents interested in looking at them again.

The real estate investors are buying again. The strategy for most is to buy and hold, as the market will come back although it is going to be a couple of years before we see appreciation again. The rental market is very strong and again rental rates are again providing positive cash flow for investors. Many investors are looking to short sales that have been on the market for long periods of time while the bank was paralyzed with the volume of files. These homes have had buyers that walked in frustration and as time passed, the properties are becoming overgrown and not kept up. As time passes the prices buyers are willing to pay have dropped and investors are picking these up at great prices.

Investors are not time sensitive and can wait while the bank is processing the short sale and are finding that the longer it takes the lower the price they can get the property for. The banks are also being more proactive in offering solutions for borrowers to remain in their properties by restructuring payments, interest rates and terms.

Homes are a great investment and home buyers need to look at home ownership as a long-term investment. Long-term growth can be achieved in as little as three to five years. Now is the time to become educated about investing in real estate, education overcomes the fear of investing in real estate. This is a great market to begin building wealth through real estate.

Carlie Back is a resident of the South Mountain District and a local real-estate agent with Keller Williams Lifestyle Realty. Email her with questions, comments and suggestions at carlie@carlieback.com.


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