Low Flying Martians and Real Estate
July 16th, 2009 categories: Pricing
What do low flying martians and real estate have in common?
Funny you should ask. Lets say you overprice your property and an unknowing buyer writes a purchase offer-in order to get it closed you have to pass inspections, lender requirements and the dreaded appraisal. If the property doesn’t appraise, the lender will not loan the money and the “deal” is usually dead in the water….unless you want to reduce the sale price.
For the sake of argument you live on Main Street in West Chester in a 4 bedroom, 2.5 bath, two story. Square footage is within 10%-15% of all your neighbors. The last 2 sales in the subdivision were closed 3 months ago in the range of $240,000- $250,000. The offer on your house is for $275,00. ( I truly doubt any buyer would offer that much-but for the sake of the story)
The appraiser may have a difficult time finding comparables to justify the loan amount on the mortgage.
Don’t blame the appraisers- because lenders are finally protecting their investments.
Which brings me back to the “martians” and real estate.
Many years ago I told clients in Beckett Ridge and I quote “unless a low flying martians with cash purchases your property- it would never appraise”. Lucky for them “low flying foreign cash buyers” purchased the house. We all a good laugh over it -but had they been normal buyers it would have been an appraisal nightmare.
Avoid appraisal problems from the get go and look at the same data that appraisers are utilizing. Questions about your area or subdivision, call or email.
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What is the Right List Price in Real Estate.
June 30th, 2009 categories: Pricing, Real Estate Sales
A few days ago, (in part 1 of 2 articles) I discussed “How to Value Real Estate“. Today (part 2 of 2) is focused on how to accurately price your property. So if you are thinking of selling in West Chester, Fairfield or Cincinnati-these basics apply.
Most (but not all sellers) sit down at a listing appointment waiting to hear the “suggested list price” from their realtor or from whoever is helping with sale. Realtors will go through a “macro” view- the area in general and work their way down to a “micro” view of your specific subdivision or complex. The report will show active listings, pending sales and closed sales of properties that are comparable to yours. The closed sales should be recent- no more that 6 months old (preferably 90 days or less) and should reflect data from the multiple listing service as well as a check of online county records- catching any sales not handled through the MLS.
Because we are in a “different market” sellers also need to see average sales prices for the last 8 years for comparable properties. The decline (or increase) is the rate of depreciation (or appreciation) that has occurred should be taken into effect when considering pricing the property for the current market.
Seller’s View:
Mr. & Mrs. Seller paid $202,00 in 2004 for the 4 bedroom, 2.5 bath, 2 story in Fairfield. Since the purchase they’ve redone the landscaping, resurfaced the deck, new carpet and new paint throughout. Figuring in appreciation (2% per year) raises the price to (roughly) $220,815 + carpet $7,000 + paint $1800 + deck $2100 + landscaping $2300 = $234,014. Then most sellers add another 10% to cover “stuff and commission which brings the list price up to $257,415.
But wait, the last 8 years of sales in Fairfield instead of a 2% per year value increase-since 2004 (t0 2008) there was an overall 8.1% decrease (depreciation) in average sold prices.
So Mr. & Mrs Seller need to rethink their math, deduct for depreciation and only look at true remodeling investments as adding some value. The deck, paint, carpet and landscaping may improve curb appeal and add sparkle to inside-but sellers cannot expect to recoup the money spent taking care of their property. In Fairfield there are currently 32 single family (4 bedrooms, 2.5 bathrooms, 2 story) active listings in the Multiple Listing Service of Cincinnati. 14 have sold/closed in the last 6 months. The absorption rate (# active listings/ avg # sold each month) equates to an almost 14 month supply of inventory. Sellers need to ask themselves where do they want to position themselves to attract offers from the next buyers coming into the marketplace.
Buyer’s View:
To Meri and Beri Buyer the question becomes…”What is the difference between this 4 bedroom and that 4 bedroom and is it worth the price difference?
It’s a fairly simple formulae that becomes complicated when emotions are involved. Trouble understanding the right listing price versus your listing price- step back and put your “buyer” hat on.
Still struggling to come up with the value- call or email.
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