Be careful what advice you take
In this time of real estate and economic turmoil, you’ve probably heard advice from hundreds of seasoned real estate professionals appearing in early morning talk shows, radio programs and leading publications. But experts disagree with the one-size-fits-all recommendations. The fact is that your area is distinct from others. Therefore local insight is very important when knowing where in the market your house actually stands. Here are five reasons why local real estate knowledge is necessary:
First, although real estate investment trusts (REITS) are primarily held by corporations, it doesn’t mean that they are familiar with your market. Ask any lender and they will tell you they prefer real estate professionals with a sound knowledge of the current price trends in the local area. They are reluctant to underwrite without a comprehensive analysis made by a trusted professional.
Second, local market conditions are distinct from one another. Even two similar homes will have dissimilar appraised values because they are affected by external factors. For example, if other homes in the area have an extra bathroom while your home has only one, all else being equal, you’d never get a higher appraisal.
Third, isolated areas can be found in communities that are most affected by the recession. These are neighborhoods that post increasing values even if the state and local market is in a downturn. Although these are few, it still holds that general opinions about the market are only as good as the news that you can read. It cannot be enough to judge whether you overpaying for the property or not.
Fourth, real estate investors do not rely on general opinion or one source to establish market values. They usually gather local opinions of the properties that they intend to buy. That’s one good way to protect their investments from too much risk.
Lastly, local knowledge can provide you current trends and discrete market conditions. Because the recession drags the market severely, it’s best to monitor prices with the most reliable sources and information.