Tweet
You can’t have a “Fire Sale” with out a fire
11/19/2009
by: Mark Subervielle
In the real estate world, “discount” is the “new black”. If a buyer or investor
cannot get a substantial, deep discount, there is no other incentive to buy. Pure
speculation in today’s market has to have a very compelling reason to buy other
than “it’s a good deal”. It has to be a great deal, once in a life-time, fire-sale
price.
But with out the motivation of a “fire sale”, there are no motivated fire sale
buyers. And without motivated sellers, you don’t have the discounted pricing and
a standoff is created. This “wait till the market recovers” mentality may work in
certain situations, like a well leased property with a decent tenant mix.
But vacant, partially renovated, and poorly leased or managed properties
are subject to the slightest winds of change in the market and can be
economically damaged virtually overnight.
So far there has been no accelerant to start the fire that would create a fire
sale and help this market recover.
There is no RTC disposition type of activity where the auction of bank assets caused such a frenzy that
buyers were driving up the prices over and above what they could pay on the open market.
That type of buyer frenzy is not happening in this downturn. The economic spin
off from new purchases is what helps the recovery. And that is what is missing.
So as buyers and sellers stare at each other waiting for the other to blink, we
stand by watch the coals in the fire slowly burn out.
