Now here’s the thing: the fact of the matter is that the world economic crisis impacted Los Cabos. That’s a fact. No matter how much we’d all like to collectively bury our heads in the sand (preferably at the beach of choice) our property values have declined. From our experience, and talking to our colleagues, you can figure about a 30% drop in property value across the board. But, that’s a nasty little fact no one wants to admit.
And the buyers these days, at least some of them, aren’t any more realistic than the sellers.
But here’s the truth: in any economy and any location a property is only worth what someone is willing to pay for it. What you’ve put into it, how much you originally paid, what your neighbor is asking for their home is all irrelevant. It’s only a matter of how much a buyer is willing to spend.
So here’s the case in point. A week or so ago I was negotiating hard on a condo here in Cabo. A nice enough condo in a good neighborhood (Portofino Pedregal), three bedrooms and a nice view but overpriced for today’s market. Granted my buyers made an offer that was too low. When the listing agent mentioned to them that the seller would take an offer 20% under the listing price they smelled the blood in the water and decided to offer at 40% less than asking. I’ll spare you the details, but the result is that the seller still owns the condo. What does stick in my craw is a comment the listing agent made at least twice during the process: “He can’t lose money.” I don’t know if that was the seller talking, or her, but it’s a sure-fire way not to sell a property in this economy.
These particular condos were pre-sold at the very end of Cabo’s land rush in about 2006-2007. So her seller paid absolute top dollar. By the time the units were delivered they had already lost value against other properties in town, although the buyers still paid the full contract price. Hey, that’s the thing: if values had gone up they’d have all been ecstatic at having made a good deal. Nobody knew what the market would look like almost two years after they reserved their unit. Just as nobody really knows how long it’s going to take for values to come back to that level. So in the meantime the seller has a tough decision to make. Is he going to continue to own a home, pay all the expenses related to it (oh, I should add that this home is unoccupied), or drop his price and take a loss just to get it sold.
Losing money on a real estate investment is not a happy thought. Obviously. But it does sometimes happen. The seller needs to balance taking a loss (which may or may not have tax considerations) and getting out now versus holding on. It might take years, and the carrying costs of the unit could eat up any profit (or lack of loss) in the meantime. The market in Cabo is picking up, there are sales reported almost daily. The vast majority of those sales are on properties that are priced at 2010 values. That means they are priced less than they would have fetched even a few years ago. The buyers are getting great deals, no doubt about that, and the sellers are unloading an unwanted or unneeded asset. It may not be the giddy whirl of a few years ago, but it’s a recovery. And presumably everyone ends up happy. That’s the new world order, at least for now.
Of course, these are my thoughts representing a buyer in a buyer’s market. How would I feel about it if I were representing the seller? Well, I’m expecting an offer, probably a low one, on one of my listings by the weekend. Let’s see how I feel about when the shoe is on the other foot.
Carol Billups is Broker/Owner of REALTY EXECUTIVES Los Cabos. A Certified Home Marketing Specialist, she has enjoyed working with both buyers and sellers for over nine years and still thinks hers is the best job on earth. She is also the real estate columnist for Los Cabos Magazine and the real estate co-ordinator for the Los Cabos Now program on CaboMil FM (www.cabomil.com.mx). You can read more of her articles on www.reloscabos.com. You can reach her from the U.S. or Canada at 1-760-481-7694, or in Cabo at 044-624-147-7541.
© 2010 Carol S. Billups