Mymiamiblog

“I am looking to buy, but I am waiting till the market hits bottom”

A top agent in my office Danell VanOrden answers this question by saying that “If you wait till they tell you we have hit bottom you are probably about six months to late” You might be saying that this dosen’t make any sense, but the truth is that it makes perfect sense.  If you look at the market like a roller coaster as it is going up prices are increasing, inventory is decreasing, and you have much less negotiation power as a buyer.  Welcome to a “Sellers Market”.

Once the coaster hits the top what comes next??? Same thing as with the real estate market; once the market has peaked there is no where to go but down.  As the market is in this downward ride prices are decreasing, inventory is increasing, and now the seller has the upper-hand and the bargaining chip.  Welcome to a “Buyers Market”.

Now pay attention here because this is where things get tricky… once a roller coaster hits that bottom one of two things will happen; it will either coast along the tracks before heading back up or it will immediately go up another hill before going back down again.  As with the market it may coast for a while before it starts to back up, but it will go back up; and once the market has hit this bottom and either begins the coast or goes up the buyer has lost the upper hand and will have less bargaining power, there will be less motivation for a seller to negotiate, and chances are that due to more competiton to buy at the bottom of the market you may actually end up paying more than if you had bought 6 months ago.

“What if I buy now and prices keep going down”

Recently I was dealing with a buyer that her biggest concern was buying now and having another unit come on the market for less than what she purchased.  My first question to her was to ask why she was looking to buy property in the first place, this way I could better understand her needs and hopefully find something that suited her best.   Upon learning that her intentions were to eventually move down to Miami Beach and live here full time I was able to better understand her and explain to her that she was in it for the long haul  I explained to her that no one knows exactly when the market will hit bottom and how over time the difference in what she might pay for a unit in a down market will probably be minimal at best compared to finding something that she really loved and loosing it  over fear of the market.  Update… she will be closing on her unit this week for $10,000 less than the last sale which closed just over a month ago.

My point is that you need to make sure you understand everything before you make a move.

• Be honest about your purpose for wanting to buy
• realize that unless you are an experienced investor that has been through several market cycles you should not jump in head first but approach with caution keeping your eyes and ears open
• that for most of us real estate should be looked at not as a means to a quick flip, but one that should be treated as a marriage… a commitment that one doesn’t go into lightly and without being absolutely sure and aware that you are in it for the long term, and by long term in the context of real estate investing I mean 5 or more years.

With this mindset when the time to sell does come around you probably will not loose money and most likely come out ahead.

image courtesy of John Burns www.realestateconsulting.com