Let's Get Real: Real estate’s top three rules never change

A seemingly good deal on a house, condo or lot in today’s market may not seem like such a good deal if prices continue to decline.

So in a market that continues a virtual free-fall, it is especially important for potential buyers to remember the top three rules of real estate: Location, location, location.

In 1996, I was comparing two Marco Island properties to determine the best deal. One was a very small, slightly rundown, old house on the tip of Spruce Court with a magnificent view; the other was a large, newer and good condition house on a “typical” canal lot on Waterfall Court.

Against my impulse for the larger and newer house, I decided to purchase the inferior house with the better view and location.

So, in mid 1996 I paid $265,000 for the property on Spruce. Interestingly, the house on Waterfall also sold in the same time period for $250,000.

Yes, a near-4,000-square-foot house sold for roughly 5 percent less than my 1,600-square-foot house. But this lesson got magnified considerably as the overall market increased in value over the next few years.

Several years later, in 2004, I sold my Spruce property for $1.4 million — after tearing down the house.

In 2005, the house on Waterfall sold for $910,000. (during the same time period in which the Waterfall house sold, the Spruce lot was probably worth roughly $1.6 — $1.8 million.)

The better location appreciated at a nearly 2-to-1 ratio.

While property values decline, the narrowing margin may obscure the lesson, but choose your next purchase wisely based on the unwavering fundamental rule of real estate — location.

If you look around Southwest Florida now, you will see truly amazing deals, especially compared to prices from just four or five years ago.

There are now very nice homes in Naples selling for under $70 per square foot, including the lot — a very tempting deal indeed. Many of these homes are being sold at a fraction of what it would cost to build.

If Marco Island is your preferred area for your next purchase, the price per square foot hasn’t got to this level, but location determines the real value.

I do think Marco Island values will move closer and closer to their mid 1990s price points, meaning double-digit decreases, while the already lower prices (in Naples, for example) will decline at a slower pace.

So as the market continues to contract, bear in mind that a property with a superior location may be only slightly more expensive, but well worth the extra few dollars.

Ultimately, a superior property might only be a few percentage points higher in cost until property values begin their ascent once again.

Interestingly, a good number of Marco Island properties have been coming onto the market recently with considerably lower price tags. Will the trend continue? I think it will.

How low will prices go? While the asking prices of many properties remain unrealistic, properties priced to sell are on a clear downward trend, and I don’t think price points rivaling those of the mid 1990s is out of the question.

No matter when or what you buy, remember location is everything.

Jeff Popick holds a Florida real estate license, mortgage broker license and general contractors license and is uniquely suited to comment on all things real estate. For questions or comments you’d like addressed in this article, write to him at jeff@jeffpopick.com.