RISMEDIA, March 2, 2009-What are the general principles we all learned about long-term investing? Research and plan. Buy low, sell high. Keep some liquid assets for short-term emergencies. These basic tenets still apply, at least in real estate.
Your buying clients need to understand that what happened in real estate was a bubble, not something permanent. It was created by removing all barriers to owning real estate. Getting a mortgage became too easy. Interest rates were at historical lows. Appreciation skyrocketed in many markets. The rush to riches through real estate came to an end because bubbles eventually burst. Now we are left with a buyer’s market, instead of a seller’s.
What can you do to show potential buyers that this is the time to buy real estate? Many buyers just don’t understand the market because there are a few more unknowns than they are used to considering.
They may be afraid we haven’t hit the true bottom yet, or even that real estate may no longer be a great investment. They may think they can’t get a mortgage. But whatever the reason, buyers need to know that, like the stock market, no one can predict the exact bottom, and buying now is advantageous due to very low pricing and interest rates, plus many sellers’ incentives.
They need your expertise to help them recognize the indicators that show the time is right to buy in your local market. Maybe it’s a reduction in foreclosures or inventory, or an influx of foreign investors, but regardless, your assessment of the market is paramount to their decision. You can prove to them real estate is a great investment by the historical data below:
1970-1979 = 142% appreciation
1980-1989 = 52% appreciation
1990-1999 = 45% appreciation
2000-2008 = 42% appreciation
Source: The National Association of Realtors
Like every investment, there are ups and downs. Even if they buy now and it isn’t the exact bottom, the resulting appreciation in years to come will clearly compensate. Now is the time to gain by buying during the low period. Patience and planning are true virtues in real estate. Where else can clients earn these percentages on money that is primarily not theirs and get a tax deduction? What are their alternatives-to miss a great opportunity or buy high?
Chris Kaucnik is marketing director for Home Warranty of America, Inc.
For more information, please visit www.hwahomewarranty.com.