What Is a 'Good Deal' These Days?

The Malibu Real Estate Report

It does not matter which season it is, or which year. It matters not what the price range is, or whether it’s a house or a condo. It applies to an investor, or a family looking for their lifetime home. Nothing matters to a real estate buyer like getting a good deal!

What is a good deal? The definition changes with the ebbs and flows of the marketplace.

These days, it is still heard from buyers: “Find me a foreclosure.” And why not? It is an attractive concept: Simply find a house where the owner is desperate to sell because they can’t make their payments, the buyer urges. “Maybe they will take 60 percent of the true value? I will save them. They are going to lose the house to the bank any time now, so just find me something where I can make a huge profit from day one.”

Or they want a bank-owned property. 

“The bank will give it away rather than have to maintain it.”

Just one problem in 2018: It is a total pipedream. Just one problem in Malibu: It is sheer fantasy. Perhaps in 2010, the wish made some sense, but this year there are virtually no foreclosures. Practically everyone has equity, so banks are not taking back property. Any “desperate” homeowner, struggling to make payments, simply sells on the open market and takes their equity away before losing everything. There are scant REOs (real estate owned, by the bank or lender) available on the open market.

Suppose you were a person, like many persons, who would like to buy a condo in Malibu—and spend less than $900,000. It seems simple enough as a wish: Get your foot in the door, be in a premium ZIP code, live near the beach. At this writing, only four such condos are for sale. That’s right—out of 1,200 condominiums/townhouses that exist in Malibu, with common areas in HOA communities, there are four to choose from in that lowest price range. How does one get a good deal out of that mess? The answer: One makes ANY deal. Whatever one pays now could very well be 10 percent less than what everyone else will be paying before long. 

Supply and demand dynamics are everything when it comes to price trends. When there are far more ready, willing and able buyers bidding on a very limited supply of inventory, the price will go up to the highest effective bidder. Then the next item that sells will probably sell even higher. That is how prices go up and that describes the Malibu market place about 85 percent of the time (since, say, 1960). The definition of a “good buy” is being the one who gets the place! As opposed to the one who pays more money later. Even more so: As opposed to the multitudes that never buy at all.

Or, perhaps one wants to buy a house in Malibu for as little as possible? Even though $1.5 million is three times higher than the state median average, and even more so the national average, $1.5 million is the very low end of Malibu in 2018. So, how many choices are there for under that price (at this writing)? Six. Just six houses to choose from. Do you think any of those sellers are just giving away their properties, or does a buyer have to be pretty aggressive to beat out the competition? The buyers of those six houses, over the next few months, are probably the ones who got the “good deals.” Cause at the so-called “low end” of Malibu, just being the buyer is being the winner, in this current environment.

It may change. It WILL change. Different dynamics will be in play in the future and perhaps a “good deal” is getting a property for 20 percent below last asking price, after it has already traveled down the price ladder to 70 percent of original list price. If and when we crash next, the “good deal” may be back to snapping up foreclosures.

But not now. Currently, just closing on an escrow should feel satisfactory to a buyer. You beat out others who nearly pulled the trigger, you can be sure. In fact, be thankful it has not become even worse. Worse would mean, in a blazing hot market, there are multiple offers everywhere. That is not the case these days. If it were, the “good buy” is the one where you beat out seven other bidders in multiple offers.