Getting Started
Congratulations on making the best investment of your life! Today you begin paving the road to your real estate
freedom. This tutorial has been designed to be a step by step process as to what
tasks should be performed when and how.
Let's start by considering the basic fundamentals necessary in selling real estate.
- Location
- Condition
- Price - Fair Market Value
- Terms
For starters, you're not going to be able to change the location of your property, no
matter how hard you try. However, you can fix the condition, as well as adjust the
price and terms in order to make your property more attractive for buyers.
As we go through the tutorial, we'll address these different areas of selling, but before we do,
let's address the main governing factor - the real estate market. Understanding the type and pattern of the
market will help you establish the price and terms needed once you're ready to sell.
The Real Estate Market
Typically, there are two main types of real estate markets -
buyer's and seller's.
- Buyer's Market: when property stays on the market longer than the average time
frame, prices are dropping, and there is a large supply of available properties.
- Seller's Market: when property sells quicker than the average time frame, properties
entertain multiple offers, properties are scarce, and prices are rising.
Ok, so how can you tell what type of market you're in? If you're in a "hot" selling market,
you'll notice that people around you will be selling their property very quickly - 1999 was one of
these years.
According to data collected by the National Association of Realtors (NAR), on average,
a single-family home stayed on the market for 4 weeks in 1999. Historically, it is more typical for
property to be on the market for 13 weeks. If this seems like a long time for you, keep in mind
that on average, buyers spend four months conducting their home search.
Real Estate Patterns - T'is the Season
Understanding when real estate property typically sells will help you understand the patterns
of buyers. The availability of buyers during a particular market will assist you when
establishing the terms and price of the sale of your property. When there's less buyers, you may
need to yield more with your terms and price, where as with more buyers, you may be able get more
from your sale.
Using historical data collected by the National Association of Realtors, we have created the following figure
to illustrate the percentage of yearly home sales on a monthly basis.
Figure 1. Seasonal Patterns in Real Estate Sales
Typically, the most regular buyer pattern is tied with the seasons. From the figure we can
see that buyers are most eager to search in the Spring (March - June) and close the sale by the
Summer (June - August). It is believed that availability of buyers tends to lessen in the summer,
as people take vacations and families plan moving before the school year begins. Once the Winter
(November - February) approaches, the availability of buyers is scarce, too many
people planning for upcoming holidays, as well as the cold winter months.
On a broader scale, interest rates also tend to play a role in the availability of buyers. More buyers will be
in the market for a home when the rates are low, especially if the rates have dropped greatly in a
relatively short period - higher rates, fewer buyers. The following figure, compiled with data from the NAR,
shows the effect mortgage rates have on total home sales.
Figure 2. The Effect of Mortgage Rates on Real Estate Sales
A final and smaller factor on real estate patterns is taxes. Patterns of buyers can be sensitive around
the time of tax returns, potential first time buyers may hope to take advantage of tax deductions for
mortgage interest. However, try not to get bogged down attempting to time your sale to take advantage
of certain tax laws. If you wait to sell your property in a year to
take advantage of a tax break, you may miss out on a "hot" market now, and actually lose out on thousands
of dollars.
One final note regarding taxes, wherever there is money - Uncle
Sam is there. Selling property can greatly affect your capital gains. Tax laws change so rapidly
that you may want to consider seeking advice from a
financial planner
or tax advisor. They can help you better understand what impact selling your home is going to have on
your taxes, as well as timing your sale to take advantage of certain tax advantages. These advisors can
also aid in ensuring that the sale of your property complies within federal and state tax laws.
Knowing Your Target Market
Target what? Target market - a fancy term used to describe the type of buyers
that most likely will purchase your property. Just because you now know the patterns of,
buyers it doesn't mean they're all looking for your property. Understanding the patterns helps you
identify when you'll have the highest pool of potential buyers looking at your
property. However, it's important to identify the specific types of buyers that
would most likely be searching for your property.
Ok, so how do you figure out what type of buyers will be interested in your
property? For starters, consider your personal situation. Why are you moving?
Where and what are you looking for in a home? Your situation may not be very
different than many buyers. Also consider what circumstances led you to purchase
the property you are now selling.
If you were a first time buyer when you bought your two bedroom ranch, then chances
are these are the same types of people that will be searching for your home.
Perhaps you're retiring and want to move back into a smaller house
after living in your five bedroom colonial seeing your children now have
houses of their own. If you traded up for your colonial, then it's very likely
you will attract these same types of families.
In addition to housing size, geographical location plays a significant role. According
to How to Sell Your Home Without a Broker, houses
and condos located in the city tend to attract single people, professionals,
and corporations to use for executives. Suburban properties tend to attract
families and retired couples, while vacation properties may attract retired couples
and urban professionals searching for a second home to use for vacations.
Identifying this group of buyers
will help you in determining what types of advertising will give you the biggest
bang for your buck when its time to
market your property. This will prevent you
from wasting time and money advertising in places that
your potential buyers won't see your property for sale.
It's now time to find some experts to help -->
|
