Wednesday, March 9, 2011

Managing Expectations

While there is a subjective component to buying any property (particularly one purchased for personal use), it is incumbent upon buyers to consider the objective component as well. More and more, I am hearing that buyers' expectations are out of control. In fact, there was an article in Sunday's Boston Herald that was basically a forum for buyers' agents to vent their frustrations. 

The bottom line is that the term "buyer's market" is one of the most overused and least understood terms I have heard over the last year or so. What is a "buyer's market"? I know what it is not. It is not a magic phrase which allows buyers to suspend logic and objectivity in order to dictate unrealistic purchasing terms. I suppose a buyer's market is one in which prices are depressed and interest rates are favorable. If this is your definition of a buyer's market, then we couldn't be in a better buyer's market. However, in order to take advantage of a buyer's market, a buyer must be willing to take action when a relatively good deal comes along.

To take advantage of today's favorable conditions as a buyer, do your subjective analysis (where do you want to buy, what amenities are of particular import, etc.). But once you have concluded your subjective analysis, leave your emotions at the door, and rely on the raw data that is available. What is the property worth, and are you willing to pay that amount? If you are unwilling to pay what a property is worth, then you shouldn't be seriously looking, as you will only be disappointed. (A qualified buyer's agent can usually provide you with a list of comparable properties and what they are selling for per square foot, which generally provides a solid starting point for valuation.) 

While there are certainly some good deals out there, it is important to be realistic. When making an offer, base your decision on the above and you will maximize your likelihood of success. For those people who say things like, "No one pays asking price in a buyer's market!" without any objective analysis, it could be a very long spring...