I normally do not watch a lot of television, but when I got home last night my wife had the TV on and I started watching the commercials.  It was amazing to me that every single commercial was about saving money – Walmart says if you buy certain meals you can save $400/month and the car dealers say if you buy a particular car you can save money because it gets better gas mileage. 

These major corporations have done their homework and they feel that in a tight recession people are very sensitive to saving money.

The question is, how does that apply to the buying and selling of Hilton Head Island Real Estate.  If someone is selling real estate, they have to make the purchaser think they are saving money and that they are getting a good buy or an excellent value.  This is the way purchasers are currently thinking.

The purchaser is only interested if he feels he can “save money” on the real estate property he is buying. 

This will obviously change the way real estate is bought and sold in our country.  I do not know how long I will have to keep selling real estate this way, but if we want to succeed, we have to follow the lead of the national marketers and understand the needs of the buyers.

I have been getting more hits on my website under the “foreclosure” tab than I have any other place on the web.  I think this shows that buyers are looking for value and there is no difference where you are buying at Walmart, a car, or a house – everyone is looking for value in today’s market.

One of the agents in my real estate office just sold a house yesterday for $345,000.  I had taken the bank an offer on the same house six months ago for $565,000 which they turned down because the bank was owed $620,000.  I tried to convince the bank that $565,000 was a good offer.

So many times when a house is foreclosed on, the person losing their property takes everything in the house out.  In this particular case, the seller took all the appliances, granite counter tops, ceiling fans, and all the fixtures – even the knobs off the cabinets. 

Obviously this particular house did not show well because who is going to buy a house that has been torn apart.  So the bank lost a lot of money because the house was in such poor shape. 

They also lost a lot of money by not taking the $565,000 offer that I had six months ago.  Believe me, the real estate market has not dropped that much in six months, its just that they did not take the offer when they should have because they did not own the house yet – it is a short sale situation and they were probably thinking they could get more. 

One of the main questions people ask me about real estate foreclosures is what the bank thinking of?  Many people ask me if they paid the bank’s loan off if they would give me the house.  Of course they would always do that because in 99% of the cases the house is not worth the amount of money owed on the loan.  If it was worth more, the previous owner would have sold it and stuck the money in his pocket.

It is hard to predict exactly what banks will do; some banks are good at getting back to us and negotiating with us, others are trying to hold out for everything they can.  In essence, banks are no different than regular sellers.  Some are more motivated than others.

If you have any questions concerning the best buys on foreclosures, please visit my website and click on my Hilton Head Island Foreclosure Listings.

In the next week we will also be releasing our own website; HiltonHeadForeclosures.com.  I will keep you posted on that.

Now is a great time and there are some great foreclosures out there.

There are many factors that go into real estate cost of ownership. 

Most people normally think of the costs being the price and therefore the monthly payments.  When interest rates are down, it allows people to buy a much larger place for the same monthly payment or pay less for the same property.  With the current interest rates, it makes it much easier to own property in our corner of paradise – Hilton Head Island.

The other costs are usually associated with insurance, taxes, homeowners association fees, utilities, yard maintenance, pool maintenance, cable TV, water/sewer, and telephone service.

Most of these costs normally do not increase.  The only ones that do have a tendency to increase are taxes and insurance.

Look at it this way, if a guy in Cincinnati is looking at buying a $500,000 condo at the beach for his family to enjoy.  He is trying to figure out what it is going to cost him after he rents it out.  Let’s say hypothetically that cost him $20,000/year.  He thinks that he can probably handle that plus they can benefit by using it four or five times a year, it adds some tax benefits and my friends can use the condo.  This is how he figures his cost of ownership. 

Now let’s say his insurance and taxes increase.  Instead of costing him $20,000/year it is costing him $30,000/year.  That is a little harder for him to stomach for a vacation getaway and he might decide to sell.

When Hilton Head Island taxes and insurance increase, you have less people buying and more people selling.  You have an imbalance in the Real Estate market causing prices to drop further.

Most politicians do not understand the effect that taxes and other costs have on the economy.  I am pleased that South Carolina has recently reduced tax for single family homes, but they should do the same for 2nd homes on Hilton Head Island as well.

I think this example proves to us that the cost of ownership is more than just the cost of the property and that is what property buyers and sellers are looking at.

I just saw some interesting figures on how we did in 2008 compared to previous years.  Home sales were down 57% from 2004 and 2005.  The 4th quarter was down 71%.  The figures are as follows for Hilton Head Island home sales:

2004-1,238;  2005-1,277;  2006-702;  2007-686;  2008-533

What concerns us the most are the 4th quarter sales.  The figures are as follows for 4th quarter Hilton Head Island home sales:

2004-274;  2005-173;  2006-123;  2007-132;  2008-79

The numbers are similar for villas even though they are off a little more.  The figures for 2008 villa sales are as follows:

2004-1,879;  2005-1,858;  2006-760;  2007-591;  2008-464

The figures for 4th quarter villa sales are as follows:

2004-438;  2005-208;  2006-155;  2007-96;  2008-67

I asked a friend of mine who owns a restaurant what would happen if you had a quarter where you were down 85%.  He said quite simply – our doors would be closed. 

We have managed to keep our doors open, but obviously we are ready to increase these numbers and get headed in the right direction. 

As any student of simple economics understands that this is having a very negative effect on the market and also on prices.

I was working out this morning on the treadmill and travel company ad came on the television that said the above phrase.  I knew exactly what was going on – they have bought these trips and have not had anyone purchase them, so in order to get more people to take the trips they reduce the price by 55%.

This time of year we always see sales at department stores advertising 75% off.  They have excess inventory that they are trying to move.

This is a common occurrence in the automobile industry – when sales are slow you reduce price in order to try and motivate sales.  There are a lot of people that won’t pay “x” but if you reduce the price, they will pay “y” because they feel like they are getting a better deal.

To some degree, that is kind of what is going on in our real estate market.  Any time you have excess inventory, you have to try and make deals to get people to take the inventory.  That is why now is such a great time to buy – we have so many sellers who have adjusted their price to try and be competitive with the present market.  You always have someone willing to sell more than you, and that is the seller who will sell for the least amount. 

Is this good for the real estate market?  It really doesn’t matter.  It is not what is good or bad, it’s just the way things are.  In the real world, when you have excess inventory or any commodity, someone is going to reduce their price to sell their products and that is what we are seeing now which is why NOW is a great time to buy!

This is the #1 questions I get every day in Real Estate.  To be honest with you, nobody knows for sure.  Unfortunately, we will not know for sure until six months after the market has bottomed out.

Are prices going to go lower?  I do not know.  But as I told someone the other day – you are not buying a mutual fund of real estate properties, you usually only buy one or two specific properties.

My advice to a buyer is to find the property you like, negotiate the best deal you can and act NOW.  Could you buy that property for $10,000 less six months later – maybe you can, maybe you cannot.  But if you like the property and it fits your needs, I think that in the long run you are going to be better off. 

Only one person picks the bottom and nobody knows when that is going to be.  I do know we have an excellent inventory of great priced property and now is a good time to buy.  And yes, it could be the bottom.

I recently saw an article in USAToday that said “Foreclosure Filings were over 3 million in 2008, which was up 81% from 2007 and 225% from 2006″. 

Nevada leads the country with 7% of homes being foreclosed on – that is hard to believe.  In other words, that is a foreclosure on every cul de sac. 

There were over 303,000 that were in some stage of foreclosure during the month of foreclosure, up 17% from the previous month and 41% from December 2007.  This surprised everyone. 

People ask me what the #1 reason is why homes go into foreclosure.  This is obvious – falling home prices.

For example, say a family buys a house for $250,000, they put down 10% so they owe $225,000.  If property values drop 20%, the house is now worth $200,000 and they owe $225,000.  They have to pay a Realtor $14,000 to sell the house, so in essence, they have to bring at least $39,000 to the closing table just to sell their house.  In that case, they usually just let the house go into foreclosure.

As long as home values continue to drop, foreclosures will increase – especially because of the very liberal lending rates that we had in 2004 and 2005 when many people could get into homes for as little as 3% down.

Congress is concerned about this, but I do not think they really understand the problem.  They keep talking about all the people that they want to help keep from going into foreclosure.  What they do not realize is that the best way they can help these people avoid foreclosure is doing all they can to make a stronger market because then home prices will rise and less people will be in foreclosure.

I got to work early this morning and picked up the local newspaper – here were the headlines:

“Hope Vanishes on Wall Street”, “US Foreclosure Filings Up 81%”, “Retail Sales Plunge”, “Retail Outlook Dim”, “Dow Shows Biggest Drop Since December 1st”, “Housing Crisis Upside Down..Bargains for Everyone”.  Obviously, if someone is in the Real Estate business it is quite upsetting to see these headlines.

I have always believed that there will be a ray of sunshine after the darkest cloud.  It is my personal opinion that the press is really trying to make it as bad as they can and hopes that Obama can come in and turn things around.  I predict in less than a week these headlines will not be visible and people will be much more upbeat and positive which means that the Real Estate market will have a chance to turn around.

My advice to everyone is to take note and buy now.  These headlines are depressing the sellers and you will get a much better buy today than you will in six months.  We will find out whether I am right or wrong, but I have done this before and I think I’m right.

Obviously this is good for Real Estate.

When people buy Real Estate they basically make their decision based on what their costs are.  Lower interest rates means costs are less and higher taxes mean their costs are more, high regime fees mean their costs are more and they usually look at their bottom line. 

In other words, what does it cost them to own a condo at the beach out of pocket?

Your income in this situation would be your rent and your expenses would be mortgage costs, regime fees, taxes, utilities and association fees.  Over my years of selling Real Estate I have had many people say that if they could own a place at the beach that they could use two or three times a year and it only cost me $10,000, I would consider doing it.  If that same cost was $20,000, they might not consider doing it. 

Now is a good time to keep your costs down simply because the #1 factor in your overall cost is the price of the property.  As we all know, prices have dropped somewhere between 20% and 25% since the high of June of 2005.  Therefore, the #1 cost factor would be the cost of the property.  The #2 factor would probably be the interest rate which is at an all time low.  The other costs (taxes, insurance, regime fees and association fees) are up – but they are not up as much as the others are down which means now is a good time to buy.