There is a lot going on in the Mid-Luxury price range, as mentioned in my previous article, What you need to know about the Mid-Luxury Market. There are many of these homes on the market in Los Angeles, and there is a strategy for each scenario. Below are three facts you need to know and how to get what you want. Please note this article does generalize even though every buyer and real estate transaction is different.
- Buyers generally have higher expectations than what is out there: In most parts of the country, if you are spending more than $1,000,000 you are getting the best of the best. Unfortunately, that doesn’t equate to the same results in prime areas of Los Angeles. Because of this, buyers are taking a longer time to decide on a home because they are looking for that perfect deal. They are also stressing out and getting frustrated because they aren’t getting what they want. So how to stay realistic? Align expectations as soon as possible. If you are looking in this price range, know what is available, not what you expect. While time marches on for the indecisive, you just snagged a home. And this could result in a better price and better interest rate than if you waited.
- Buyers think they know most things about real estate: There are news articles about real estate daily. Because of this, many buyers think they can outsmart the market, and even the real estate professionals themselves. The problem with this? They often pay more or negotiate themselves out of a deal. That’s because many of the articles they are reading are a broad stroke of what is going on, not what’s really happening with homes a specific Buyer is looking for. I have seen this happen time and time again, and it isn’t pretty. How to be realistic? Look at what is happening on a micro level and trends in the neighborhoods. This can include walkability, building code changes, and pricing history of a neighborhood. A great example is sometimes buying a new construction home today may be better than buying a fixer or tear down because you can’t build the same size home anymore, and construction costs are on the rise.
- Many buyers want a fixer to save money, when in fact, it ends up costing them much more: Many buyers in this range think that they will buy the fixer to save on property taxes and money over buying remodeled or new construction. Here’s the deal for Los Angeles: as soon as you pull permits for any work completed on the home (which I recommend), once City approves the changes, a notice is sent to the County Assessor’s Office, and your property taxes are adjusted accordingly. And on top of this, the costs developers pay for remodels or new construction are often less than what a home buyer would pay for the same work. This means a buyer can be paying more in property taxes than expected and more in construction costs than buying a finished home. Lastly, building codes change almost yearly in Los Angeles. What the developer built may not be what a buyer can build today. Now of course there are some benefits of buying a fixer, such as having it custom to your needs and wants, and a lower mortgage (if you didn’t want to use the cash equivalent in the form of a down payment). So how to be competitive over these types of buyers? Stay current on building code trends and what features you are looking for in a home. This will allow you to determine if a finished home you see has value or not and you can strategize accordingly.
Of course, reach out to the experts (such as contractors, CPAs, and Realtors®) because they can guide you through many of these scenarios to get you the best results possible. Even with rising interest rates and lower inventory, you can achieve your true goal.
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