The World is Full of Obvious…
“The world is full of obvious things which nobody by chance ever observes.” – Sherlock Holmes
My 12-year-old Volvo died with 150,000 miles. I had to buy a new car. Car salespersons and real estate agents have similar goals – to sell. I bought my car the same way Homebuyer Associates helps clients purchase a home. Give it some thought when you buy your next car – or home.
We helped a client not buy a home because of the obvious thingswe saw, but by chance, most homebuyers don’t observe. In my past newsletter: http://bit.ly/1S6frUy
I noted the real estate system is stacked against buyers.
The asking price was $529,000. The home had been on market for 97 days. Our market analysis placed the home value at $450,000 – $455,000. How?
First we searched a 3-block radius for homes of similar style and size that sold in the past year. The median sale price was $450,000.
Then we looked at homes sold in the past year in a 6-block radius using the same criteria. The median sale price was $456,000. Then we searched for recently sold similar homes located on the same block. The median was $448,000. The sold averages for the 3-block and 6-block radius also confirmed our number of $450,000 – $455,000.
Takeaway: Comparables need to be as close and similar in style as possible to the home you are considering buying. Many traditional agents broaden the search area to substantiate the asking price
I rarely speak with the listing agent about price. That’s a no-win discussion as the agent’s job is to use stories to sell the home. In this instance the agent asked what I thought of the price. I told her: $450,000.
Remember, the agent’s job is to sell, so the agent helped “educate me” and noted I should be using square- footage cost. She pegged the sale cost at $164.00 a square.
Takeaway: Be careful. It is the real estate agent’s job to bond with you and sell you. If the comparables don’t substantiate price, the agent might pass off something that might, like square-footage cost.
Square-footage cost is used in other parts of the country. I don’t believe the 4-county metro area has enough data yet nor is the square-footage cost prevalent enough to be of value.
I indulged the agent. To substantiate the $529,000 asking price she told me of a home nearby that sold for $604,000. The home she wanted me to compare to was a much larger home. I reduced the price of the larger home by $164.00 per square foot and ended up at $465,000 – far closer to my number of $455,000 than the asking price of $529,000.
Takeaway: “Many errors in personal finance (buying a home is finance) can be prevented. But first, people need to understand what they ought to.” – Robert Shiller
I believe Homebuyer Associates has a distinct competence that allows us to better represent homebuyers than the traditional real estate system or even the roster of part-time buyer agents. Have a cup of joe with Seamus or me if for no other reason than to gather information.
How did it end? Our client offered $450,000. The seller did not accept the offer. After 115 days the listing expired which means it did not sell. It remains off market.
We continue to work with our client to find the right home at the right price – based on data – not a story.
Thanks for reading,
Michael D. Holloway