The tone around real estate since 2008 has not been very positive. I don’t think there is one of us who has not experienced a decrease in property value whether it is our own property or that of someone we know. Real estate of course is one of the publically held assets that we use to help determine one’s capacity for wealth. I begin to wonder how many prospects were dismissed simply because real estate was the primary publically held asset we could find. In some cases, this may have been a very fair assumption but this is no longer 2008 and we need to take a second look and really think about what does their real estate holdings mean.
The one thing I learned in my years of doing prospect research was to take a deeper look at the information I have gathered. We need to remember to continue to do this process and not simply look at just the assessed/market value of a property. We need to re-think how we take that deeper look into real estate.
The first would be when did they purchase the property? If the property was purchased in 2000 then I am willing to bet that perhaps the property is not “under water”. By this I am referring to the fact that if they sold their house right now they would more than likely get more than their original purchase price. I am also willing to bet that these individuals were lucky to refinance their homes at the extraordinary low interest rate that has been available. This can result in extra cash that is available.
The age of the prospect can be a factor. If your prospect is in their 60s – 70s then take a look at description and detail of the property. If it is a 4-bedroom home then definitely try and uncover the purchase date because I bet in most cases these homes are still a big asset to the individual. It is not uncommon for them to start thinking about down-sizing and buy a smaller home or condo that is less work and also means their original asset has become a little more liquid. They sell their home for a very nice profit based on their original purchase and bought a condo at a great low deal and now have cash in the bank! Another thought that goes along with this is if they are indeed retired, do they have a second property that is their vacation/winter property? Even if it a recent purchase then start asking yourself the question – “Did they buy it outright?” Living in the Phoenix area (a well-known snow bird location) I know of a couple who got an incredible deal on a condo and then just purchased it outright. Clear sign of privately held wealth and the value of the property is only going to go up.
I know in the past we have a tendency to see purchases of new high priced property as a sign that maybe our prospect is buried in mortgage debt. I am beginning to see this in a different light. Banks are no longer granting ridiculous unaffordable loans to individuals unless they are sure that they not only have the income but perhaps the assets to afford that seven-figure home. The last thing banks need are any more homes reverting back to them because people can not afford the mortgage payment. So perhaps someone who has made a recent purchase of a multi-million dollar home is even a better prospect than someone who purchased a multi-million dollar home in 2006 or 2007. This also speaks to what I said earlier that the value is more than likely only going to go up.
Michael Quevli is a consultant for Target Analytics. You may reach him at firstname.lastname@example.org.
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