We’re Not in Kansas Anymore
It’s a cinematic moment forever immortalized. A young lady and her little dog step nervously into the sunlight of a brand-new world. It’s a cacophony of color, sound, and strange little people with squeaking voices.
“Toto, I’ve a feeling we’re not in Kansas anymore.”
Even though she was confronted by unfamiliar surroundings and terrifying dangers, Dorothy managed to conquer the challenges of Oz and return home victorious. It’s a great story that offers a valuable lesson in real estate investing for us today: Times change and markets change, and we must deal with those changes.
Sellers may not be strange little people with squeaky voices, but they are often the slowest to recognize that things have changed. Many are still clinging to opinions of value from January and February of this year and are reluctant to acknowledge that rising interest rates have made the cost of money more expensive, thereby lowering the value of their homes. Buyers have less purchasing power. (Cont below)
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(Cont.) Real estate investors who used to be able to make strong, all-cash offers are now finding that sellers still want full price, and that asking price now makes no sense from the perspectives of either buy and hold or fix and flip due to the changes in the market. In a trend that has not yet picked up much news reporting, some sophisticated, short-term rental operators are walking away from that business because they recognize that it is merely swapping hours for dollars, and they don’t want that.
The leadership of ICOR was visionary in that they anticipated the market shift we’ve seen this year and scheduled meetings in November 2022 designed to prepare its members for the shifting economy. These meetings will focus on a creative offer pathway to present sellers with multiple ways to sell their houses, maybe even for prices close to those market highs from January 2022.
Sellers usually have one of two principle problems. They either have a “house problem” or a “money problem”. Once you learn to discern the real problem, you can move forward with a solution for the seller that also makes sense for you as an investor.
Most will agree that the house-buying techniques that have worked so well the last several years will not work in the next few years. If you want to stay in business, you need to adapt in order to survive.