Over the past few months (if not more) our agents have had their hands in various deals – some which are still in progress, many others which flopped. Is that because of the market or the nature of our business?
It seems the past is just that. Our residential agents are receiving calls to list houses; our commercial agents are receiving calls to list businesses, buildings and land for sale and lease. Even better than having listings, we are seeing buyers. In the past 2 months, listings that I, the broker, have on the market not only have daily calls but we have contracts in place. Product of the economy? Perhaps the prices fell to the “right” level or perhaps the money is flowing a bit more freely.
Whatever the case may be the fact stands that we are busier now than we’ve been in quite some time and it is only getting busier.
Ignore newspapers and other media outlets which still sing doom & gloom. The market has bottomed out for the most part. Have values dropped in commercial real estate? Of course – but not as so many buyers expect. Property value does not just plummet.
Commercial property values are determined in 3 ways: Comparable Sales, Income and Replacement value. Many buyers in this market (aka VULTURES) are by-passing the first 2 and looking only at the replacement value (what it would cost to rebuild a property). That would make sense when a property has no income or when there are few comparables. The fact is, properties are selling and many have income. When there are no comparable sales and/or when there is no income, replacement cost is the certainly the way to go.
Commercial property is not out, and certainly not as down as residential. The housing market is not nearly as soft as the condo market. Do you want a great deal?? Wait a few more months and then start cruising many of the beach areas as well as Downtown Miami. Tons of new construction which had nowhere to go or is now priced to sell.
With all this happening, how are property purchases being funded?? Some properties are being purchased in cash; other properties are being purchased with minimal financing and a great deal of cash; others are being funded with conventional loans. Loans? YEP!
We have found that many buyers do not know where to look. We happen to have a great deal of banking relationships which we can and do put to use. Some of our current deals have obtained funding because of who we know.
At the end of the day, value is what one buyer is willing to pay to one seller. The banks have some say but a buyer who wants something will figure out a way to get it. The challenge lately is persuading Sellers that their prices are a bit high and educating Buyers that not everything is in pre-foreclosure.
There are many signs of life that the real estate market is on a rebound. The bumpy ride is nearly over.