Monday, October 29, 2012

No Recent Sales = Green Light to Price Aggressively?

(Mis)Reading the Signs

Pricing real estate is fundamentally precedent-driven.

In other words, if you want to establish an estimated fair market value for ?Property H,? you first need to determine what Properties E, F, and G sold for.

In Realtor (and Appraiser) lingo, E, F, and G are called?Comp?s (?Comparable?Sold Properties?), and the compare-and-contrast process that?Realtors (and Appraisers) go through to come up with a price range is called ?making adjustments.???

See, ?Why the Neighbor?s Home Isn?t a Comp?; ?Real Estate Bracketing ? Advanced Beginner Version.?

Stale Comp?s ? or None

But what if there aren?t any good Comp?s, because the property you?re trying to value (?subject property?) is unique, or in an area where there have been few (or no) recent sales (note:? Comp?s have a shelf life of six months, max).

Is that positive or negative for current prices?

It?s certainly tempting to conclude ? as many homeowners would like to ? that few or no recent sales is bullish for values.

After all, if there?s no supply, and lots of demand, prices go up, right?

Unfortunately, every rule has its exceptions.

Still-Thawing Market, or, Sellers Who Can Afford to Wait

So, in some upper bracket Twin Cities neighborhoods, there have been few (or no) recent sales because:? a) Sellers don?t like (still-depressed) prevailing prices; and b) they?re financially secure enough to wait things out.

When that?s the case, pricing a home aggressively (high) is? . . . a big mistake.

That?s especially true when the home in question needs significant updating, given the discount Buyers are now demanding for that these days. ?

What?s likely to happen?next?

Unfortunately for the would-be Seller, not much.

The market ? i.e., prospective Buyers ? is likely to perceive the home as overpriced, which means it will rack up lots of (harmful) market time with minimal interest.

Source: http://rosskaplan.com/2012/10/no-recent-sales-green-light-to-price-aggressively/

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