A PRISONER IN YOUR OWN HOME?
Residential real estate is full of emotion. As a former business owner, when my family moved to Florida in the 90’s, I decided to get involved in real estate. I was leaning toward the commercial side of real estate when I learned that it is more head than heart. It is all about numbers with little emphasis on emotion. Residential real estate is the opposite. It is filled with emotion. That made my decision easy. I wanted a job that helped people fulfill their dreams. I wanted to share their emotions when they found the perfect home or when we helped them transition when it was time to move on in life.
There is an adage in our business that says, “Buyers are liars.” For example, I have seen Realtors who exhausted themselves showing their clients homes that met their criteria only to have them buy something different. The buyers weren’t liars, they just didn’t know what they wanted until they saw it. Then they could justify a change in their want list to accommodate their desires. The “must-have” three-car garage wasn’t so obligatory after all. A sales agent soon learns to “sell the sizzle, not the steak.” Sometimes listening to a customer involves more than just hearing words.
But there can be a downside to the emotions of residential real estate as well. Who doesn’t know someone with a “Champaign taste and a beer budget.” Reality sets in when the home they want is beyond their means. The first thing a buyer should do is get qualified by a lender and understand what they can afford. Besides, a seller won’t usually accept an offer without written pre-approval from a lender or proof of funds for the purchase price.
The emotional part of residential real estate can affect sellers as much as buyers. Whereas the value of commercial real estate is largely determined by formulas and numbers, residential real estate values are determined more by the open market. Sellers don’t determine the sale price any more or less than buyers do. The MARKET determines the value of a home.
Market value is the price at which a home would sell in the open market. It is the price that a willing buyer and a willing seller would accept with proper exposure and no undue pressure on either party. Of course, we have all seen instances where one side or the other was particularly motivated to act and the other side benefited, but they are rare.
An important part of a real estate agent’s job is to analyze the market and advise their customers appropriately as to market conditions. Like most markets, the real estate market is cyclical. The ebbs and flows of the market sometimes favor buyers or sellers. A home that is listed above market value will have to wait for the market to catch up. In a buyer’s market, such as we have today, time only exacerbates the inequity.
This brings me to one of the saddest things I see in real estate…a homeowner who is a prisoner in their own home. There are many reasons this can happen. Perhaps the owner owes too much and really can’t afford to sell at the current value. They are forced to remain in a home that isn’t best for their current circumstances. But sometimes it is simply because the owner wants to sell for more money than the home is worth. They end up holding the key to their own prison!
If you have any questions or comments about this article or other real estate issues, please contact Bob Oxnard at whiskeycreeknews@ yahoo.com.
