Real Estate 101: Understanding a Transitional Real Estate Market

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“People always say that real estate is a great investment because the value of homes is always going up. To some extent, there’s truth in that. But it’s also a fact that the real estate market fluctuates. Sometimes it’s a buyer’s market and sometimes it’s a seller’s market. And there are actually other times when the real estate market is in transition. A transitional real estate market poses certain issues for people who are buying and selling homes and you should be aware of them. This is especially true for anyone involved in real estate right now because the real estate market in many areas is either in transition or could be in transition shortly.

A transitional real estate market happens during the interim between a buyer’s market and a seller’s market. There’s this funny period of time in which the market isn’t particularly good for either party. In a way, this gives each party some leverage in the real estate transaction. And yet it also puts them on solid ground. If you are buying or selling a home in a transitional real estate market, there are some things that you can do to help give you a leg up in the interaction.

Here are some tips for buying or selling a home in a transitional real estate market:

1) You should know whether it’s going from a buyer’s market to a seller’s market or the reverse. Being aware of this helps you to position yourself and sell yourself appropriately. For example, if you are a buyer and real estate is transitioning to a buyer’s market, you can point out to the seller that he’s going to have a harder time selling in two months and therefore should make the sale to you at a good price. Likewise, if you realize that it’s a transitional real estate market that will soon be in your favor, you might make the decision to hold off on the transaction all together.

2) Understand “fair market value”. When you are buying or selling a home during a buyer’s market or seller’s market, the value of the home is based significantly on the supply and demand issue. When you are buying or selling a home in the transitional real estate market, the home’s sale price will be based more closely on the fair market value of the home. You should learn this concept inside and out and work with appraisers in your area to determine the FMV of the home you’re buying or selling.

3) Be aware that terms are more solid in a transitional real estate market. There’s going to be less negotiating during this time so you shouldn’t make false offers on either end hoping to manipulate the other party. Be more direct in your dealings during a transitional period.

4) Work with a professional who understands the transitional market. You’ll want realtors (and lenders if you’re buying) who understand the transitional real estate market which means that you’ll need to look for people who have been in the industry for a long time.

It’s possible to get a good deal on either buying or selling a home during the transitional real estate market period. But to do that, you need to know what a good deal is and you need to be able to position yourself in the interaction based on that knowledge. Working with professionals who know the transitional real estate market is a good start to getting that good deal.”

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