VOL. 36 | NO. 41 | Friday, October 12, 2012
What’s that house worth? Take a guess
Determining a property’s price is one of the most daunting tasks in the real estate profession. If the property is priced too low, the seller loses money. Real money. Greenbacks. In some cases, their retirement. Conversely, if a property is priced too high, it can have the same affect and cost the seller money.
Most real estate sales data shows overpriced homes sell for less than those priced properly, whatever the heck that is. Real estate agents who claim to know exactly what the price of a home should be are wrong. They don’t know. Nor do the sellers, nor do the buyers that do not buy the property.
An aside: Many sellers want feedback from showings. What is hard for them to comprehend is that the feedback they so desire is from the people who do not like the house. Would a Romney supporter want feedback from an Obama fan?
There are several factors that are not pertinent in the sale of real estate:
n What the buyer paid for the property. The current owner could have paid too much or stolen it. Doesn’t matter.
n The tax appraisal. Who among you has ever let a Metro employee wander through home taking measurements, notes on improvements, etc? Metro knows the lot size and square footage, then compares that data to comparable sales in those two categories. A 1,500 square foot home with no improvements has the same Metro appraisal as a tricked out, over-the-top home with a swimming pool and solid gold chandeliers.
n The list price. The price that the listing agent and the seller have placed on the house has no relevance whatsoever. A seller recently argued that he had reduced the property four times, and the buyer needed to know that. The property was reduced four times because no one made an offer at the other five prices. The buyer could care less that the home was overpriced. As one buyer asked during a negotiation “That’s an interesting story, but what does that have to do with me?”
n What the relatives and neighbors think it’s worth, especially out-of-town relatives. They don’t know the market, but are quick to offer opinions.
n The cost of improvements, and, no, lawn care and paint are not improvements. Nor is the built-in trophy case for the 47 Little League trophies accumulated in the stunning four-year career of the son, now 28 practicing law in Arkansas. The law school diploma is in a drawer somewhere. The appliances were replaced because they broke. The roof was replaced because it leaked or it was smacked by ferocious hail. The instant, tankless hot water was the seller’s choice. None of these add value.
n Architectural plans that the seller has procured at great expense from a renowned architect. The fact the seller went to great expense to have the home redesigned waves the flag that the seller found the home, in its current condition, less than desirable. The fact that the plans were not implemented implies that such construction may be too expensive. In short, it is not economically feasible to make the home inhabitable.
As is the case in most investments, or sales, timing is the key. Market trends are as important as past sales. In 2008 and 2009, it was difficult for sellers to realize that the market had shifted downward so dramatically so quickly. While in 2010 and 2011, buyers accepted the shift, understood it was universal and that, while they would be forced to sell for 20 percent less, they could in turn buy for 20 percent less.
Now, there has been a shift in most area sub markets. And many agents are slow to adjust to that shift, having only recently toiled for months, if not years, with properties that were not selling.
The keys to receiving the best price for homes are to watch trends, give value to the past, have the home in pristine condition, allow showings at all times – the previous two are not mutually exclusive – and work the first offer until you’ve had all you can stands and you can’t stands no more. It’s more than likely the best.
Sales of the Year
As the year enters its final quarter, it is interesting to take a look at upper-end sales, those more than $1 million.
In order to understand where things are, let’s take a look at the past. In 2009, there were 149 sales in the area of more than $1 million. That list grew to 151 in 2010 and 175 in 2011.
The highest number for sales in that price range was 291 in 2006.
This year, there have been 158 sales of more than $1 million, with 29 more under contract and 18 pending for a total of 205. That’s an increase of 30 compared to the entire year of 2011, 56 more than 2009. The market is on track for 284 sales, the second most in the city’s history.
Richard Courtney is a partner in Christianson, Patterson, Courtney and Associates and co-author of Come Together: The Business Wisdom of the Beatles. He can be reached at firstname.lastname@example.org.