Lessons From the NY Brokerage Market
The high end market in Manhattan has been teaching a very important lesson recently about agents making promises about valuations. Even the most experienced agents would never have expected some of the enormous price reductions seen recently at a time when interest rates are low and the economy is booming, yet here we are and some of the promises made by some agents to some of their clients a few years ago are proving to be completely wrong.
We have all heard the agent who promises "tremendous gains" over the next few years.....a "strong upside"..... the kind of lines that some agents simply cannot help themselves from saying. Often these guesstimates are forced upon agents by buyers who seem unable to buy anything without some form of promise of an upside. When buyers asks me about making big, quick gains, I encourage them to visit a Las Vegas casino instead. Even when they have the very best intentions, an agent making any kind of promise related to valuation upside can come back to haunt them when markets dip. Traditionally real estate escalates in value over time, especially in larger growing centers with more limited land supply, mostly tied to inflation. Real estate can also drop in value rather rapidly, just as it can rise swiftly too.
I have always told my clients that QUALITY real estate escalates in value over time. Real Estate is not a liquid investment and sometimes it can take years for a market to recover, especially after extreme pricing application. I have also alerted them that valuation dips are possible and probable too. To be perfectly frank, I would never have predicted the size of the pricing drops we have seen recently in Manhattan: that has come as a shock to me, especially outside of a deep recession. We as agents have to insulate ourselves from misleading the consumer in any way and the only way to do so is to never make promises related to future valuation. We can provide estimates related to a property requiring a renovation. I would always provide a range, rather than specific pricing, indicating the variable in pricing between strong and weak markets.
Be careful of pricing promises. No one can predict the short-term future as it relates to real estate valuation.