Identifying Target Real Estate Markets, Cycles & Locations

Location, location, location…the real estate 101 catch phrase we’re all familiar with, if not engrossed in.

Why is location so important, though?

Practically every aspect of a home can be altered or changed with enough money, time and resources, except location. Even the most serious of home defects, such as foundations, structures, roofs or new electrical systems can be fortified, updated, replaced or repaired.

Then what determines a locations desirability?

If you’ve ever owned a home, you might understand how your neighbor’s home, the foreclosure down the street, city school systems, tax funding, and new development impact your home’s value. As many additional aspects also contribute to desirable locations and home values, these main components lead most people to avoid all properties in certain locations. Some people know so much about a location that they don’t even realize they missed a diamond in the rough because they failed to explore or reach outside of their single strategy.

Ready for one of the best kept secrets in the real estate market that the wisest investors don’t want you to know? You can make money in any location, through smart investments, by applying the correct strategy to the current market cycle.

What do you mean? What is a market cycle strategy?

Almost every aspect of investing (e.g. stocks, bonds, real estate, etc.) have market cycles. Within the real estate market specifically, there are common cycle points, often referred to through different names, including: Peak, Early Downturn, Full Downturn, Bottom, Early Recovery, Early Stable, and Late Stable. Check out the graph from Creonline.com below for a visual of what these mean.

When viewing a historical market cycle via line graphs, you’ll generally notice that the market resembles a roller-coaster. That’s because the cycle is progressively advancing through each stage of the market over time. This is caused by various means, but often results in those who own real estate applying the incorrect strategy, not understanding that it is commonplace for a market to bottom out and peak, for instance.

Often times missing the correct point to apply a certain strategy will lead to selling at the time you should be holding, renting to a tenant when you should be selling, and overpaying purchase costs due to a lack of inventory or decision to follow the crowd.

So which strategy should I apply during each cycle?

The answer to this question is complex, but on a basic level real estate owners who generate wealth typically apply these general strategies during each respective point in the market cycle:

1) Peak: Sell

2) Early Downturn: Sell or Hold   

3) Full Downturn: Hold or Acquire

4) Bottom: Acquire

5) Early Recovery: Acquire, Develop and Explore Renting

6) Late Stable: Rent, Refinance, Improve, and Prepare for Selling

7) Peak: Sell

Next week we’ll check out more in depth information on each specific cycle and explore various strategies that can be applied to any location, as long as it’s the right time.

Until next time, make sure to Know the Home Before You Buy™ by obtaining your Home Fax™ Report and other real estate information from www.NationwideHomeFax.com and of course, all of your inspection needs from Home Fax™ Inspections!

Who’s controlling the inspection process?

During the last segment we discussed some impact examples of a Seller’s Inspection process. In case you missed it, check it out here.

Here’s a real example of how controlling the inspection process effects everyone involved:

A buyer’s inspection was completed on a $160,000 home. ¾” separation gaps were observed along the foundation tuck point where the landscaping grade continuously directed water into the basement windows (which were not insulated and exposed). A broken downspout drainage extension in the same location was directing more water into the same area, causing mold to spread into the basement while penetrating the electrical wires for the control valve box.

Using the inspection report from Home Fax Inspections, the buyers negotiated $25,000 off the price, purchasing the home for $135,000. The buyers resolved the issue for less than $2,000 before taking possession of the home, 2 months later, saving them $23,000. 

Pretty good return on investment for the buyers who paid a $400 inspection price, wouldn’t you say?

Now as a seller or agent, you may be cringing. Why?

Not only did the seller lose out on $23,000 from the purchase price, since they could have made the same repairs for $2,000, but the time it took to close increased the sellers process by around 6 weeks. Since they were relocating, this increased their expense for temporary housing and travel, consumed enormous amounts of their time, and had no positive outcome for the seller who thought they were too busy, and wanted to save money, instead of having the same repairs completed themselves. 

If that was the end of the atrocity, it would be enough. But it wasn’t…

With a 3% commission, the buyer and seller agent each lost approximately $1,000 (or 25% of their total commission percentage) and invested hours, days, and weeks of additional time, potentially leading to the loss of additional sales or clients as a result.

Needless to say, a seller’s inspection would have saved enormous amounts of time, money, and hassle. Don’t wait until it’s too late to control the inspection process. Work smarter, not harder.

Agents, are your clients getting the most out of their home inspection?

A quality home inspection reaches beyond the scope of a one-day, one-report consultation. Many home buyers have a quality agent who understands and truly cares for their needs. These buyers are educated and informed along the way, leading them into home ownership with success and confidence.

Unfortunately though, some buyers do not come to ever fully understand the purpose of a home inspection, and sometimes not until it’s too late. Often times the lack of understanding is the result of an uninformed viewpoint that the home inspection is ‘just another check in the process.’ 

Every home inspection should be considered an investment into the purchase of a property. Although a meager sum of the typical home price, a quality inspection report serves, among many purposes, as a continuous reference point for the owner, short and long-term.

• Agents, do your buyers have the chance to sit down and review the inspection report with you? 
• Do you follow up with the inspector after a buyer has received an inspection?
• Do you offer the buyer an opportunity to clear any misunderstanding or clarify anything about the home that may be beyond the scope the inspection?
• Receive critical environmental records that may contribute to their well-being?
• Home maintenance tips, easy-to-understand graphs or presentations, or even an explanation of the inspector’s role in the home buying process?

The first step in maximizing the learning process for a buyer is having the right inspector.

So, are your client’s getting the most out of their home inspections?

Check out www.HomeFaxInspect.com and see how else Home Fax™ Inspections helps you look good and your client’s Know the Home Before You Buy™. Looking for additional real estate information services in the mean time? Check out Nationwide Home Fax™ and learn other ways to make informed home buying decisions today!