Monday, December 29, 2008

Why are so many properties for sale in the complex/neighborhood?

First off: My apologies to everybody who has subscribed to my blog and received an e-mail announcing my change back to Century21. That was an old post (I have been back with C21 now for several months) and somehow that post was automatically resent to all subscribers. I have no idea how that happened.

Now to this post: I have been out showing a lot of property lately and one of the most common questions is :How many properties are for sale in this neighborhood/complex? When I answer, this question follows: "Why so many?".
Because not much has sold over the past two years. Properties have come on the market and just sat; meanwhile more properties come on the market and they just sit too because sellers continue to ask too much money for their property.
Real Estate Value has significantly dropped in the Keys over the past 2 years and that is a bitter pill to swallow for property owners in the Keys.
The Keys are a very unique and desirable area; we do not have as many distress sellers as there are in most other areas. Most distress sales in the Keys are by owners who purchased their property at the top of the market with creative financing. Many of these owners had the intention to flip the property and not hold onto it for a long time. Then the market changed and all over sudden flipping was no longer an option. Those are most of the short sales and foreclosures.

I have been selling Real Estate in the Keys for a long time; here is an example how prices changed over the years: This is not an isolated or extreme example:
I sold a condo to customers for 220K in 2001 (I think it was 2001) and sold it three years later for 850K! You can imagine that many people started to invest in the Keys; the Keys no longer were just a great place to own a vacation home but also a great area for investment. Money was easy to get especially in high appreciating areas such as the Keys and a lot of people bought as much property as they could get financing for. It was a sellers market!
Here is where the problem in the Keys started (In my opinion): Sellers became greedy. I recall going on listing appointments telling the seller what would be a marketable price for their property and not getting the listing because another Realtor had told them a much higher (unreasonable) price for which they would list the property. Needless to say the listing went to the agent who listed the property at a much higher price. That property would sit because overpriced properties don't sell - even in a sellers market. Now the next door neighbor wants to sell their home and uses the asking price of his neighbor as a comparable and so on. Before we knew it the majority of listings were overpriced and did not sell.
Supply and demand governs if it is a sellers or buyers market; as supply grew, demand grew smaller.
This actually happened before Real Estate starting doing poorly everywhere else in the US.
We all know what happened next.

Activity in the Keys has picked up greatly over the last few months.
The Keys will always be a desirable place and continue to be a good area for an investment for that reason. That is one of the reasons why many people are looking for Real Estate now: they know that it is a buyers market and the really good deals are flying off tbe shelf.
This is not the best time to sell but there will always be owners who are ready to sell their property. Some are old and no longer use the property, some inherited the property and are not interested in it, some want to buy something somewhere else ...

You can sell everything in any market for the right price.
Here is the problem in the Keys: Most sellers are not willing to realize that the value of their property is not what it was 3 years ago; not even close!
When I told a seller not too long ago what would be a marketable price for his property he was not very happy with me and told me that he appreciated my honesty but he is not desperate. Selling something at market price is not desperate!
The value of something is what somebody is willing to pay for it.

That is the reason why so many properties are on the market in the Keys: Because at least 80% of them are overpriced.
Personally I do not understand why every owner who does not need to sell and is not willing to price their property at a marketable price does not take their property off the market. It's not going to sell anyway; the property just floods the market.
BUT there are those sellers who really want to sell and there are buyers ready to buy at the right price and that is the sales activity reflected in the Keys right now.
If you are a buyer: don't pay any attention to how many properties are for sale in a neighborhood/complex. It does not indicate that it is non desirable area; it reflects that most properties are overpriced! When determining the value of a neighborhood or complex don't look at other listed properties for sale, ask for comparable actual sales! That is what an appraiser goes by! An appraiser is not permitted to use other asking prices for compatibles.

This is a great time to pick up a good deal.
If you work with me you can rest assured that I am aware of all recent sales and will advice you with the knowledge you need to be educated about the current Real Estate market in the Keys.

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