There’s only one sure way to know the true value of real estate

BUYING, selling and renting real estate is all about the dollar in the end, so how can people decide if their expectations are too high?

A FRIEND shared a sad story with me the other day, about a woman he knew who had spent more than a year trying to sell her property without any luck.

“She’s tried everything but just can’t get a buyer,” I was told.

My response: “What a load of codswallop” (or words to that effect).

The one thing that any seller can do to get a buyer is simple, but often uncomfortable: drop the price until someone is willing to part with their money.

The true value of any slice of real estate is what the market is prepared to pay. Whether you’re a buyer, seller, investor or tenant, it’s simple supply and demand.

It can be a rundown, rat-infested pile of dirty bricks, but at the right price somebody will buy it, even if only for land value.

Selling or renting real estate can be frustrating if you get your numbers wrong.

Property prices are affected by plenty of things including location, interest rates, nearby facilities, marketing success or failure, fear of missing out or fear of losing money.

That fear of missing out often drives sellers or landlords to hold out for a higher price for their property, even when the holding costs are painfully eating into their potential profits.

SAVING: Death by a thousand cuts for retirees

It makes more financial sense to drop the price of a property by $5000 rather than spend three months hoping for a higher offer while spending $500 a week on its mortgage and other costs.

Median house prices can be a good guide of the value of real estate in a city or suburb, because they show what the middle sale of all sales in the area were. However, they can be distorted when there are only a handful of sales that may skew the median price much higher or lower than the norm.

Auctions can provide a clear picture of what people are prepared to pay.

Nobody wants to rush into lowering their price unnecessarily, so it’s wise to consider a few things before any big drop, including:

• The trend. Knowing whether home prices are rising or falling in an area over the past year or two can give you an idea of the next direction they may move;

• Time spent on the market: A good real estate agent or property manager will be able to tell you the average time spent on the market for properties in your area;

• Your patience, both mental and financial. If you can afford to hang on to wait for the market to meet your expectations, good luck to you. But if you’re desperate to sell, things will only get more desperate.

• Buyer or tenant interest. Any property that’s taking a while to sell or rent will have some feedback from customers. Listen to what the market is saying.

An important rule — especially for investors — is to remove emotion from any decisions.

Your attachment to a property means nothing to a buyer. All they really want is for you to be desperate to sell or rent so they can negotiate a better deal.

Always remember that the true value of any real estate asset is always going to be what someone is prepared to give you for it.

@keanemoney