I was trying to price a townhouse that I will be listing soon. I found three identical units currently on the market. They are all corner units, they were built the same year and the interior decor was almost identical right down to the color of the paint in the dining rooms.
One of the units is a short sale, it is listed for $199,000, another is a foreclosure it is listed for $133,000 the third is a private party selling their home without bank intervention and it is listed for $164,000. I did some more checking and the average sale price for the townhouses over the last year has been about 159,000. About one third of the units that were listed last year sold.
If you need to sell and their is an identical unit on the market for much less than you plan on listing yours for it will mess things up. Some say there are two housing markets and maybe in a way there are because on average the distressed properties are selling for much less than properties that are not in foreclosure but many are also in rough shape. Foreclosures that are in good shape do have an impact on the value of neighboring homes especially when the townhouses are identical.
Once a property is bank owned it does lose value. People will not pay as much for foreclosures as they will for the same property that is not in foreclosure.
The example I use in this post is a huge range for identical homes. Buyers should do some careful shopping if they want to buy the unit that is priced at $133,000. Sellers need to take a good look at he competing houses before deciding on a price. The townhouse that is listed at $199,000 is over priced and unlikely to sell no matter how badly the seller needs the money.
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Great post. Such a relevant issue all over the country and it also brings up something that gets harped on a lot, but is worth mentioning again: Pricing a property too high just to “feel” out buyers isn’t going to work. In fact it will usually hinder any chance of getting a reasonable offer on the property. Especially in a market where short-sales, foreclosures are sharing the same neighborhoods with similar properties that aren’t on the market.
Hi Teresa. We don’t take in “Bank owned properties” Even if the price is low, the buyer wants a lower price and ALL problems that come in the packet. The buyers complaining over 1000 tings who don’t work or in bad condition, ect. The Bank doesn’t take the problems, so the buyer comes to you. We “don’t touch Bank owned problem”.
Sundream – I am happy to work with the bank owned properties. They are sold “as is” As long as the buyer understands that it works out. It is the short sales I won’t work with. Almost half of all homes on the market here are foreclosures.
I’m curious what price you arrived at for the unit you are selling.
We will be looking to sell our townhome in the next year and I’ve been keeping an eye on what similar units are selling for and the range is about as wide as this one.
Jen – I looked at how much sellers actually got for the townhouses and recommended a price no higher than 163,900. Pricing is a challenge and so I run numbers the day they go on the market. I also like to take my sellers to see other homes for sale so they can see what the competition looks like. Some take me up on it most do not.
Thanks Teresa. That’s a good idea, checking out the competition. I can’t believe people wouldn’t take you up on that.
At the same time, if these prices are driving foreclosures to lower and lower sales, then it is going to cause a more severe problem in the market. Having foreclosures listed at lower prices could result in a continuous downturn of the pricing for real estate, leaving those who are wanting to sell to not have the ability to compete with the banks. It is not necessarily a bad thing for banks to decide to raise prices. I have a list of available competition for those in the San Diego area at http://www.teamaguilar.com/reo-properties.html.