Some of the realities around real estate make this a challenging market to be in.
Of course, it’s rewarding, too. Most experienced real estate investors and property collectors wouldn’t say it’s not worth it. But they tend to have a more realistic idea of how the real estate business works today than others who have never really looked at properties on paper, or on the street, in terms of actual value.
One example is the predominance of generic real estate models when it comes to financing, qualifying, negotiating and working out a settlement deal.
The short way to describe it is that the market is simply built for a certain type of home.
We often say that the market is built for the $200,000-$250,000 house.
What does that mean? That means that it’s easy for realtors and others to work with a house that has a type of median value and number of bedrooms and bathrooms and all the rest. It’s easier to know how to value that property and how to move forward.
As soon as you get into a property that’s substantially bigger and more expensive, though, things tend to get a little stranger.
The Challenge of CMAs
Realtors use a comparative market analysis or CMA process to value properties. They have to look at other properties that are similar to the property in question and extrapolate value that way. That makes it tougher to value a larger and more expensive home that’s built in an unusual way.
Another problem is that the pool of available buyers is smaller. That leads to other problems with negotiation and value.
The Value of Hard Money Lending
In addition, on many of these deals you can have problems with financing.
Sort of like the involved parties might have a hard time valuing the property, the lender might have a hard time approving the financing. They’re used to approving financing for the less expensive properties, and without very abundant amounts of assets and income, lenders can be leery, especially after the subprime debacle.
Locklin Capital offers hard money lending for real estate in ways that facilitate real deals. We know how these deals work, and we know how to move them along with conscientious and knowledgeable input from the hard money side. Let us be part of the solution to a problem that is created by inefficiencies in the housing market, and ambiguity around value. We have the expertise to help you to cut through the red tape and get to your goals.