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With all the bad financial news in the marketplace over the past year - stocks crashing, foreclusures hitting new record highs every month, financial hardships in every sector, it is sometimes easy to lose sight of the local picture because of all the noise about the national/international situation.

Real estate is still local however. While the pundits are preaching the huge declines in real estate in the U.S., they are talking an average across the whole country. That means that many areas have had even bigger declines in value than the average. And it also means that many areas have had smaller declines or even appreciation.

You wouldn’t know it from listening to the national news. But if you follow your local market (as you should) you know what is happening there. For instance, as of August, 2008, real estate prices in my zip code increased by 5% according to the local real estate association that tracks such things.

Of course, even in this rising market in my zip code, there are still bargain houses due to people being in bad financial straits or needing to move because of a job transfer. And the market is much slower in terms of how long it takes to make a sale than before - which also has an impact on the market. This gives you more negotiation ability - provided you find someone who needs to move rather than who wants to move.

Think about it - someone in a good local real estate market in terms of price appreciation can just wait to get their price in a slow sales market if they do not need to move.

But for someone who needs to move in a slow sales market, they will at some point become much more flexible about the price they are willing to accept because they need to get out.

So - rising or falling market - what does this challenging situation mean to you as a real estate investor?

It means that you don’t want to just grab something because it seems to be a bargain. Before  you jump, you want to be sure you fully understand your local market, the direction prices are going and your exit strategy for the price.

As an example, it is not a good deal to get a 20% discount on the listing price of a house you intend to keep short term (1-3 years) if the market is still trending down. But if you can get the same house at 40% below its current retail value, it could be a great deal.

Know your market. Take time to investigate each deal against your strategy for that property. And move forward with confidence in your analysis.

Do not react out of panic or visions of dollar signs dancing before your eyes. Do not jump on a deal that seems good. Be sure that it is good.

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