Busted! Nine myths buyers and sellers believe about the current real estate market in Cayman!
There are many wrong ideas regarding buying and selling property in Cayman. Heid Kiss, Broker of Engel & Volkers Cayman Islands, will discuss nine of them. Buying and selling real estate in Cayman is a challenge so let us discuss some misconceptions so that everyone can get to their real estate goals.
Sellers are so excited to sell in this market, and we see a few cashing out. But where do they invest now, they have cash? On the others side, buyers are discouraged before they start looking. Affordable housing is a challenge like everywhere in the world. My daughter, who lives in Vancouver, Canada, put offers in on four properties; she was one of ten other buyers who offered simultaneously. Finally, she secured a condo, but she had to pay 10% more than the list price. It is not just a problem in the Cayman Islands; North American real estate is the same.
As of April 2022, there are only 7 existing homes for sale and 32 existing condos for sale under US$750,000. It is frustrating for those who need a mortgage to buy, as cash buyers trump anyone who needs a mortgage.
So, let’s discuss some myths and how you can succeed in this market.
Sellers Thoughts: True or False
- Seller preparation is not needed: False. As a seller, you must present your house in the best light possible. In Cayman, we do not have ten all-cash offers lining up at your door. Buyers still expect your home to be in list-ready shape; they want to see a clean and well-prepared home, which alleviates any stress that your home could be a dangerous money pit. If your home is dirty and neglected, the offers will be fewer and for lower prices. Your Advisors main goal is to get as much money for you as possible. Make sure you stage your property with the help of your Advisor; if they do not suggest this, look for another Agent.
- List at a high crazy price. False. Your advisors will be honest with you, they want to get the most money for you as possible, but buyers are not stupid; they do their research and know the ballpark of what property in Cayman should trade. You will know you are listed correctly by how many showings you get right away; if the interest wains after a couple of weeks or a month, you are priced too high. Reducing a list price in this fast-paced market signals to a buyer that the vendor is more negotiable. We have seen some unrealistic prices in the past, sellers will list and test the market to see if someone falls for it, but they don’t want to sell. For example, on our MLS, there is a US$40 million house that has been listed for the past 12 years.
- You can sell as-is. False. As a seller, your primary goal is to get the best price. Therefore, you must fix all those nagging trivial things you have lived with. I have written another blog about this. The words “as is” can make a buyer look elsewhere or assume something is wrong and you are desperate to sell, and therefore they can offer a lower price. We see severe things in Cayman homes and condos: deteriorating a/c systems, older asphalt shingle roofs, termite damage, moisture leaks, and structural cracks in the walls. Less critical issues include cracked tiles, broken door handles, leaking toilets, broken fans, and blown lightbulbs. Another obstacle is a cluttered house, and you will not even get a buyer inside as it can look overwhelming from the photos. Sellers are wise if they listen to their Advisors and fix the issues before listings.
- Offers should come in with no conditions or contingencies. False. In Cayman, buyers are still cautious and want to include an inspection, especially if it is a home. One way is to get an inspection done before you list so that you can share that with the buyer. Purchasing a home is a massive financial decision most people will make in life, so it is reasonable for buyers to require contingencies in their Offer to Purchase. They will want a mortgage condition even if they are preapproved. Banks and valuations are conservative here. It takes six weeks to get a mortgage approved. Of course, you will not want to have an open-ended condition.
- Buyers: True or False
Prices must come down, so I will wait. False. Did you want to buy in 2021 but decided to wait until the pandemic was over to look at real estate? You now see that the market has increased again over last year. Although there is so much construction on who will live in them, we will have an oversupply. Guess what? They were already under contract, and the buyers planned to move into them. In the past two years, we have seen a 20% to 40% increase in real estate prices in some sectors. Buyers are now paying a lot more, and the interest rates increased by 2%. A pre-construction condo that sold in early 2020 for $250,000 is now selling for $360,000, and it is not ready until September. Some pre-construction complexes that entered the market in 2020 have not even started construction because the construction cost makes it impossible for the developer to make any money selling for what they did in 2020. Inventory is low, and I do not see that changing anytime soon. Careful and successful developers are not eager to start buying when they cannot lock in their construction costs. For example, Jon and I purchased our Seven Mile Beach Condo at the top of the market in 2008, and we are so glad we did because the condo has increased four times in the 14 years.
- The boom in the Cayman Real estate must crash. FALSE. I am confident that Cayman real estate will not take a nosedive in value. Some of us remember that 14 years ago (many of our current buyers were still in high school or college) when the world saw the great real estate crash of 2008. Why did it crash? There are a few reasons: loose lending guidelines, no down payment needed, no income verification, first, second and third mortgages! However, we did not see this in Cayman, and we had very few bank foreclosures in Grand Cayman; our market just slowed down. In 2022, there will continue to be a massive amount of wealth moving into the real estate market. During the pandemic, housing needs and requirements changed; people could sell their expensive homes, locate less costly areas, and use that cash to buy 2 or 3 properties for rental income. A few hundred restaurant workers left during the pandemic, but those were replaced with construction workers and the financial services sectors required more accountants and lawyers. The Cayman Government offered a program where entrepreneurs and households who could work from home relocated to Grand Cayman. They rented houses for a few months and then bought properties. Historically, Grand Cayman real estate has doubled every seven years, but we have seen a considerable increase these last two years. Buyers who think the market will crash are waiting for a 747 to arrive at GCM.
- I must waive all conditions or contingencies for my Offer to be considered. FALSE. You do not have to come in with an all-cash; no contingencies offer to be competitive. You can have contingencies, but you must be smart about how they structure them in an offer. Your Engel & Volkers Advisor can guide you on this. You can have a mortgage condition, but make sure you have a local lender who pre-approved you. If you require an inspection, do so within the shortest timeframe possible. If you are buying a condo, request at least the last two years of AGM minutes and financials for the strata.
- You cannot negotiate on overpriced properties. FALSE. Try looking for a property that is back on the market or has been sitting on the market for a while. If the sellers must sell, you could get a deal. Forget about submitting lowball offers; those might have worked in the past but not right now and not in the Cayman Islands. Your agent can help you put an offer together that might get you the house, an offer that is reasonable to you and acceptable to the seller.
- Look for an off-market property to get a deal. FALSE Every Engel & Volkers agent has spent hours and hours researching the local property and reaching out to their clients to ask if they want to sell. We are in the real estate trenches every day; this is our life. A seller knows what comparable properties like theirs are selling for, and if they are unsure where the market has moved to, they will reach out to their agent. They might sell, but it will be on their terms and price.
In conclusion, the Cayman Real estate market is constantly changing. You need an experienced, local agent to advise you on the current market trends. It would help if you used a full-time agent who eats and sleeps in real estate. An Agent with years of experience that you can trust, who guides you as a buyer or a seller through these uncertain times. Do not get discouraged. If you want to own property in Cayman, you must enter the real estate market sometime. In five or ten years, you will say, I am so glad I bought it when I did!