Sunday, January 01, 2012

But MY House is Worth Much More Than That!

This weekend, on New Years eve, I place an offer on behalf of one of my buyer clients on a property in Lynn. This home is a 3 family in a nice area and has a good size double lot. It also has new heating systems, a newer (7 years old) roof and a garage. The kitchens and baths are outdated, however, and there is quite a bit of cosmetic work that needs to be done in all three units. The 2nd and 3rd floor units also share a heating system and a hot water heater.

 This home is listed in the low $300,000's. I looked up what sold within the last 6 months in Lynn for 3 family homes. There were only 3 sales in Lynn that went just above $300,000 - and those were properties that were completely rehabbed with new kitchens & baths. The average 3 family sold for just over $220,000. Now there are many factors that go into determining the market value of a home, so you can't just take the average price and think that this is what the property is worth. After looking at similar properties, I determined that $280,000 was a fair price to offer to the seller. In fact, there had been only 5 three family homes in Lynn that had sold for more. I submitted my buyers' offer along with an explanation to the seller of how we derived at that price, and a list of all three family homes that had sold showing that his asking price was too high.

The seller rejected the offer without even giving us a counter-offer. The listing agent said the the seller wanted to get a offer very close to his asking price. He didn't care what the reality of the market was, and that he had put a lot of work in the house and it was worth much more than what the statistics showed. Needless to say my buyers were put off by this, and didn't want to submit another offer.

Before this property was listed, the seller's agent showed him all the comparable properties, the market stats, and the properties that were currently listed that would be competing for the same buyers. He chose to ignore all that information and the advice of the professional that he hired, and came up with his own list price.

It will be interesting for me to watch this listing, because if it is follows the usual pattern of overpriced listings this property will have its list price drop until it reaches a point where it is in line with (or below) the market. The multifamily market is hot right now, and if a property is priced right it sells in a matter of days. If it is not priced right, it will just sit on the market for months. This particular property had just come on the market last week, and had it been priced right it would have had several showings. My buyers were the only ones to look at it, and that was because the property suited what they were looking for, even if it was overpriced.

I will probably receive a call from the listing agent in the near future asking me if my buyers are still interested in home because they hadn't received any other offers. Unfortunately for the seller, my buyers will probably have already purchased another home.

- Jim Armstrong
Here is a good article on overpricing a home:

1 comment:

Mark D. said...

From your lips to God's ears, Jim. Happy new year!!