We all know that buying real estate, but especially in hot markets like Miami, is one of the biggest personal investments you can make. When you’re shopping in a competitive market, like the Miami real estate market, it’s important not to be pressured or cajoled into making a quick decision. Many real estate agents use the “fear of loss” factor very effectively and it is a popular ploy in the hottest markets.
The first thing to do is to understand that the market is cyclical. That is, it will not continue to go in any direction permanently. Granted, over the long term of 5, 10 or more years, there will be a definite trend, but don’t expect a capital increase year after year.
This fact frees you from another popular strategy of real estate agents…the “buy now because the price is going up” plan. Honest agents will show you market profiles that justify the sale price of any property. These profiles must include not only the requested sale price as well. There are agents that make statements like; “the market will rise 10% this year” or “that you will recover your investment in 2 or 3 years”. Now, unless you have a crystal ball or can see into the future, these are false statements that should raise a red flag in your mind.
Never buy real estate and base the purchase on something that happens in the future. If it’s a “good deal”, it’s a good deal NOW, not in 10 years. A lot can happen during this waiting period.
This does not mean that the market does not get red hot or that if you do not jump into something immediately, you will end up sold. These things happen. But it’s important to remember that there are other factors involved in any housing market, but they are especially evident in a robust or seller’s market.
These include the GREED FACTOR. People look back several years and then use that information to decide that the market will continue to go up in the future. “Past performance is not indicative of future results” is a popular statement about many investments, but some people don’t seem to believe it when it comes to real estate.
The next step is the MAJOR FOOL THEORY. This is one that even bankers use to justify lending to some people who can barely qualify. The theory is that once the property is sold and the loan is closed, the increase in appreciation will provide the bank, or the owner, with better protection. The idea is that the owner can sell it for more money to the next person who is willing to pay to enter the market. The problem is that, once again, it assumes continued positive appreciation in property values.
People seem to forget that it wasn’t that many years ago that property in much of Florida sold for a very low price. There was little to no appreciation in many real estate markets across the country for years. A normal market will return sooner or later.
By buying on the rush and buy strategy, you risk buying at the top of any real estate market. However, this is especially true when talking about an attractive market like Miami Real Estate.
Shop wisely as a good investment is still a good investment no matter the market.
