Century 21 CEO Lost $200,000, But Still Happy…
No one is immune from the decline in property prices. Even the CEO of one of the biggest real estate firms in the nation cannot control it. However, his story gives a different twist to the normal property woes that we read.
Tom Kunz, the CEO of Century 21 bought a $340,000 property in Tuscan Ranch, California in 1998. In 2004, he received a cash offer of $1,300,000 for the property. He did not accept the offer. He decided to rent the property instead to a relative.
Recently, a similar property sold for $1.1 Million, a 15% decline from what was offered to him 3 years ago. In paper, he lost $200,000 . But, he is still happy because he made a profit of $700,000 from his original investment of $340,000. Before inflation, Kunz has seen about 14 percent compound average rate of growth on his home investment since he bought it in 1998. Although, if he sold back in 2004 he would have seen a 25 percent rate of return.
However, not everyone shares the same view as Kunz. Most homeowners are not happy with the decline in price of their property, irregardless if they made a profit or not. In fact, others won’t accept the decline in value. They are still hopeful that their perceived value is the market price of their property.
In fact, Chris Isidore of CNN Money reported that:
"Other economists say most sellers aren’t as willing to take Kunz’s view, noting that the stubborn desire of some sellers to hold out for the price their home used to be worth is one of the problems for the real estate market."
""The average person buying or selling only does it a few times in their lives. It’s driven as much by emotion, and by what their neighbors did a year or two ago, as where the market is today," said Mike Larson, a real estate analyst at independent research firm Weiss Research. "You do get a bunch of stubborn sellers, they may not realize how much the market has turned down, or how much inventory they’re competing against.""
What was interesting about this story is the contrasting view of people who are in the business of real estate and those who bought 1 or 2 real estate properties either for their own use or as an investment. Tom Kunz knew at the end of the day that he still earned money from his investment. However, for others they felt that they lost a big chunk of their nest egg or retirement money.
I think most people will be more optimistic and realistic about the market if they will view their investment the way Tom Kunz did. After all, real estate is very similar to stocks, you only realize your profit or loss when you actually sell your investment. At this market, if you can hold off from selling then do so. Otherwise, it is better to be realistic with your prices rather than have a stale property.
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