Many years have gone by since the real estate market of Costa Rica was adversely affected by the housing crisis in the United States. That crisis marked the before and after in the way luxury properties in our country are promoted. Previously the market was saturated with highly overpriced luxury properties and buyers were willing to pay the price. Now we have a luxury real estate market still saturated with properties that have been on the market for years but wary buyers are no longer willing to pay whims.
The reality of the current market is that luxury properties are worth what buyers are willing to pay for them. It is a market where the appraisal is no longer a starting point to define a realistic price for the property, where a good location is not so crucial to determine its value, where the sentimental value that the owner has for the property is no longer relevant for the future buyer, nor does it matter as much that the price has been significantly lowered. It is a market where the buyer will always want to get the biggest discount and, when presented with a very low offer, the seller will have to ask himself if he will take the opportunity or leave it. To take it will make it possible to move on to the next stage; to leave it could mean the property continues on the market more months or even years without any certainty of obtaining a better price. Sadly, our experience in some cases has been that buyers who have rejected an offer end up selling for less a few years later.
Because the reality of the high-end real estate market in Costa Rica is that we cannot estimate how long will it take for a property to sell, we cannot estimate with certainty what is the best price to attract a potential buyer and whether sellers should wait or continue offering the property. In short, it is a market of uncertainty. To give assurance in this market is to guide the owner to erroneous conclusions.
How can this situation be addressed when a buyer has a serious motivation to sell in the shortest possible time? The main way to do this is to provide credibility. Credibility is defined as the feeling of trust and respect that the seller inspires to a prospective buyer.
By providing credibility the owner is telling the potential buyer that the price is right, that the property has not been overpriced due to sentimental value or for any other reason, that the it is priced to sell and not to be parked indefinitely. The owner conveys to the buyer a sense of respect and trust. Respect is manifested by defining a price that is in line with reality. The buyer perceives confidence when a seller presents an excellent quality property at a price that is in line with demand.
In this market, overpriced properties are considered an insult to the intelligence of the buyer. The high-level buyer is an educated buyer who carefully studies supply and demand; these buyers easily identify the properties that are overpriced, compared to those that are priced in line with current reality.
Those who bought properties or built their luxury homes on the highest point of the market, just before the housing crisis, quite possibly will never recover the replacement value on their investment, and may not even hope to get a return on their investment. Unfortunately, these are properties that are now classified as “properties highly overpriced,” because their current value does not correspond to the present trends of the market.
So the task for homeowners who want to sell their property this year or next year is to build credibility around their intention to sell, to study the comparable properties in the area, preferably not similar properties for sale, but properties that have been sold and their selling price. Since in Costa Rica there isn’t a data base of sold properties, the task of getting the final sale prices becomes a Herculean effort. If sellers do not have a direct and trusting relationship with someone who has managed to sell their property, they will often end up getting information second-hand from acquaintances or others who may be aware of the sale price, in order to obtain reliable data.
Credibility is built when developing a relationship of trust and respect with everyone involved in the process of selling the property, including potential buyers and the real estate broker. The property owner has to see the process as a team effort, where all participants have the same goal and in one way or another, will benefit when the process is concluded.
Credibility is also built when selecting a successful, trustworthy, and experienced real estate professional, because in the high-end market, the potential buyer will not feel comfortable putting financial information, personal information, and the whole negotiation process in the hands of someone who does not have the experience to take responsibility of the process in a safe and reliable way.
Finally, credibility is built by being trustworthy and authentic. A trustworthy owner will act properly throughout the sales process and will generate confidence in the buyer to disclose all information necessary so that the sales process is safe and transparent. The seller will not commit to what he cannot deliver and will do whatever he can to comply with everything that has been agreed during the negotiation process. The seller will be authentic by fulfilling his word and will act at all times with the best intentions.
At the same time, the professional luxury real estate specialist will have to commit to the same principles of credibility, authenticity, integrity, respect, and trust described above, because these values will determine that the whole sales process is carried out in a successful and transparent way, for the benefit of all those involved.
Casa Alta Vista is a good example of a property very well priced and below market value
Photos courtesy of Costa Rica Luxury