Inefficiencies in Real Estate Transactions
Real estate is basically a combination of two different elements: land and the physical improvements of land. As the name indicates, real estate represents a real or some physical property. This property is associated with land, building, roads, ponds, canals and other machinery objects.
From the past few years, the real estate market in the Greater Atlanta area has surged. Most of the investors around the hotlanta area are interested in making a profit of buying and selling properties. Some Georgia counties have even changed the rules and regulations for real estate investments to attract more buyers.
The concept of inefficiencies:
You might have heard that the real estate market is believed to be the most inefficient market in terms of transactions. If we look at the concept of efficient market hypothesis, it maintains all stocks at a perfect price as per their specific inherent values. The knowledge for those investments is commonly shared by the participants associated with that market. There are a few important characteristics of real estate properties; the list includes:
• All the real estate properties are unique.
• Only a few sellers and buyers are active at a time.
• Prices of the properties keep on varying depending upon several factors.
• Properties in the real estate market present a durable product.
Now, if we look at the real estate market, it is
something like a bubble that starts increasing with the rise in demand; however, the supply is limited. Same as air takes some time to take the bubble up, this market also takes some time to expand and then it may even become unaffordable for some people. In some situations, it also has a fall, and the price falls. The demand and supply keep on increasing and decreasing like a bubble. People make their investment decisions by observing this trend and make efforts to maximize their profits. There are many other factors as well that make the real estate market the most inefficient market in the world. Few such factors are discussed hereby to boost your knowledge base.
Factors affecting inefficiencies of the real estate market:
1. Physical factors:
Here is one of the most important factors that influence the inefficiency of the housing market. It is determined in terms of the location of the development; the analysis is regarding whether the place is feasible or not. Few other factors are also included in this category; they are natural geographic boundaries, topography, soil condition, water availability, natural resources, climate and transport patterns. But note that, these factors do not affect property values individually; rather, they are interconnected.
It is usually observed that hilly areas are priced low as compared to the properties available at flat areas. However, some investors plan to invest in hilly areas to develop tourism-related facilities such as large hotels and tourist spots.
2. Economic factors:
Economic condition is another important factor associated with the inefficiencies of the real estate market. It is usually measured in terms of few specific indicators such as the price of goods, manufacturing activity, employment data and GDP. Other than this, some parameters affecting inefficiencies of the market include production tags, disequilibrium between supply and demand, cost of agency misuse, value of the currency, low number of investors, high transaction cost and many more. When the value of currency decreased or increases on international grounds, it has a direct impact on the real estate market as well.
3. Technical factors:
Another key factor affecting real estate market inefficiencies is a technical factor. In this 21st century, human beings have become highly dependent on technology. No business can work without the influence of technologies and latest advancements. People also consider such factors while investing in real estate property. They are always eager to know about the quality of telecommunication systems, electrical facility, transportation options and access to routine life amenities. Luxuries are not possible without technology, and if the trend is missing, people show less interest in making an investment.
4. Lack of information:
After the above three factors, real estate market inefficiencies are also associated with the lack of information; preferably regarding the debt market. The general scenario says that investors and lenders rely on each other to making the best out of any opportunity in the real estate market. But when buyers are not aware of the funding options around, they cannot take solid decisions. Although many banks are ready to provide loans to investors, it is important to evaluate the interest rate options. They also need to make an in-depth analysis of repayment policies and duration. Lack of information discourages people from making a big investment in the market.
Studies reveal that investors don’t want to spend their money on random properties. They first prefer to evaluate some important matters. After the above three essential factors, people are also concerned about government interventions in the area, accessibility, security, sanitation facilities, infrastructure, availability of work surroundings and entertainment options.
Properties that can generate stable incomes are more preferred by the investors. People want that value of the property they are planning to invest must rise with time so that even if they plan to sell or rent it in future, it must ensure great returns. Hence, no one wants to compromise his investment. The prime idea is to look for the best location, most efficient properties that can ensure long term returns.
The bottom line:
The inefficiencies keep on varying for commercial and residential real estate market. Many experienced investors even prefer to do some in-depth statistical tests before spending their money on any property. Statistical tests can provide an idea about which parameters are going to affect the value of particular property in the long run.
Even if the market transactions are inefficient in nature; it is still fruitful to invest in commercial as well as residential. You can make some in-depth analysis of associated factors and choose the most valuable location for your investment. A strategic investment can definitely ensure long term profits.
Video Transcription
Karine: When you’re faced with a job relocation or if you inherited a property in another state, you need to sell your house fast, get the money and move on. A quick way to do this is to sell your house for cash, but before you do, you should know it’s not like a normal home sale. Here’s what you need to know before you sell your house for cash.
Hi, everyone, Karine here with HomeLight. When the going gets tough, a cash sale is your quick ticket out. You’ve probably seen an advertisement to sell your house for cash fast, whether on a billboard, an online ad or a flyer in the mail, but what’s the deal with selling your house for cash? Is it actually legit? And who is the buyer behind that pile of money? We’ll get into all of this, but first, let’s go over who all cash buyers generally are.
Cash home buyers are real estate investors. There are a few different types of real estate investors that you should know about. The newest investors on the scene are iBuyers. These new age investors like Zillow, Instant Offers, RedfinNow and Knock, use an automated valuation model and other technology to make quick cash offers on residential homes. You also have the fix and flip investors or the house flippers. These investors are your Chip and Joanna, Tarek and Christina, people who put down all cash offers on distressed properties in desirable locations, flip them and then resell them for a profit.
Some big flippers you’ve probably seen are We Buy Ugly Houses and We Buy Houses. You also have buy and hold investors. These investors tend to be bigger. They’re professional experience companies who buy properties and then rent them out to make money. Also known as institutional investors or real estate investment trusts, these guys snatch up single family homes across the country. Some big REITs are Blackwood’s Invitation Homes and American Homes for Rent.
Now, what can you expect when you work with one of these investors? First of all, there isn’t really a go-to best choice for who you should or shouldn’t sell your house for cash to. Each different investor mostly works the same. You’ll submit your property information and receive an offer within a couple of days. There’s no commitment to accept the offer so it doesn’t hurt to check it out. Depending on your market, you could get dozens of all cash offers on your house.
With our new simple sale tool, you can compare your options and shop through investors to make sure you accept the highest cash offer on your home. The most important thing you should know before you sell your house for cash is that you likely won’t make the same amount of money you would with a real estate agent. Real estate investors that offer to buy homes quickly for cash usually offer somewhere in between the ballpark of 65% and 94% of a home’s value. That’s why it’s important to compare your offers for free with our simple sale tool, and if you want to make the most money possible, selling your house for cash might not be the best option. Working with a qualified real estate agent may take additional time and may even cost you money up front, but you will receive more money from the sale of your home.
Like all cash offers, there’s no obligation to work with a real estate agent, so why not connect with one and see how much they could sell your house for? Find a top real estate agent who can help you sell your home fast and for more money at homelight.com.
