Home Selling in 18951>Question Details

William, Home Seller in 18951

Townhome vs Single Family Home

Asked by William, 18951 Sun Oct 28, 2007

Hi all,

We are selling a 4 yr old, 4 bed, 2.5 bath, 2600 sq ft home on a half acre and in a desirable neighborhood in Bucks County PA. We have a potential buyer who is spooked by the market. They are trying to decide between a new construction, 3BR, 2000 sq ft townhome for 100K less and our 4BR home. Quite a difference! But they can afford either. They may be moving in a year or 2 to relocate (not definate.) They are leaning towards the townhome. Their logic - the "experts" say home prices are going to drop x percent next year. If they spend 100K less on the townhome, they will lose (100K * x percent) less when they sell in a year or 2. Yes, IMO there are alot of holes in that logic! Our home is their dream home, the townhome is a place to live. I have given them some arguments for purchasing the single over the townhome. Of course, in the end they'll do what's right for them. But what is your opinion on this logic - can you really compare the 2 choices like this?

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William’s answer
Keith - I appreciate your decision to reply but I have no idea where all that came from. For the record, our home is listed on the MLS, Realtor.com, and we are following an extensive marketing plan for the home. We are paying a full 3% commission to buyers realtors and reaching 100% of the market. I have a strong respect for realtors and understanding of the work they do, and feel they should be compensated fairly. The rest of your agenda has nothing to do with the question. Not sure what I did to warrant all that venom, but not interested.

I'd really like to stay on topic and hear the opinions of others that care to comment on the townhome vs single family investment decision in this tough market.

Michael and Karoline - thanks for the replies! Yes, I feel the same about the investment and quality of life and have shared the thought with them. You can't expect the 2 homes to follow the same value path - homes with unique features will retain their value better (and homes in our neighborhood have proved this over time!)

I spoke with them today, found out that they haven't really taken into account "new construction" costs for washer / dryer / fridge / microwave / window treatments / etc. they would need to spend on the townhome. I pointed out that when they sold, buyers would typically expect those amenities to stay with the home (especially in a bad market) - so they would essentially be starting $4k-5k in the red when they moved in! We're offering all the appliances, another advantage of chosing our home.

They have a 1 yr old, and our neighborhood is just full of families with babies and little kids - it's just perfect for them (and I think they know it!) They've been back for 4 showings, and they have an incredible price in front of them. They even get to keep the swingset :) Really a great couple, we would love to see their family in this home.

Hopefully we'll get them to take a step back from the spreadsheet and look at the bigger picture! Was very suprised at their approach to buying this home - assuming a certain percentage loss in value (from the expert projections) and basing their decision to buy on the bottom line number of how much they would lose when they sold...
2 votes Thank Flag Link Sun Oct 28, 2007
Town houses can be tougher to sell because there can be two, three or more almost exact same town homes for sale at the same time. I'd also be concerned about buying new when you plan to sell in a few years. If the complex isn't finished by then they will be competing with new construction when they sell. Give them a great price and they should bite.
2 votes Thank Flag Link Sun Oct 28, 2007
Every buyer has different reasons behind a home purchase and different methodologies for rationalizing their purchase. In this instance, they are financially risk averse and may need to understand the intrinsic value of land over the improvement which sits upon it; it obviously helps if the improvement, i.e. the structure, is well-built and well-maintained. For now, continue marketing and keep this buyer on a short lease.
1 vote Thank Flag Link Mon Oct 29, 2007
Hi Bill - As you know very well, this market is a bit different compared to when you bought your home in 2003. Buyers are no longer being told by mortgage companies that they can afford anything like they did previously. There are also gloomy forecasts and prices are still going down a bit. A few years ago, you wouldn't see a buyer who wants a single family home also looking at townhomes. They are not comparing apples to apples.

Buyers IMO are not thinking with their hearts like they did previously. They are worried about what the experts are saying, and there are less qualifed buyers now then there were before August this year.

What I think you have to remember here is that this is a business decision for the buyer - and you need to take the emotion out of it yourself and remember that it is business move for you as well. As experienced agents, we know that you can't "sell" someone a house. You will drive yourself crazy trying to do so.
All you can do is market the home to as many people as possible, make sure it is clean when buyers come through and price it where homes in your area are selling.

The right buyer will find you - and you won't have to talk them in to buying your house. Good luck.
Web Reference: http://www.cityservice.com
1 vote Thank Flag Link Mon Oct 29, 2007
The buyer needs to buy a home they feel is right for them. One that meets their needs. It is not up to anyone else to twist their arm in one direction or another. Please keep in mind, and this market "corrects" itself, it is doing it for the entire area. If the homes decline 10%, it will also effect a home they are selling as well. We all know the market will change again, and homes will once again increase in price. We do not of course know how long that will take, but history prooves that this will happen.
Now is a great time to buy a home. Inventories are high, and prices are still tumbling. Interest rates, although a bit higher now, are still a good deal. It is a great time to buy. Deals are out there to be made. If you need a good realtor to help negotiate one of these excellent deals for you, please call. Don Bradbury 215-536-6777 x 329 http://www.bradburyteam.com
Web Reference: http://www.bradburyteam.com
0 votes Thank Flag Link Fri Jul 4, 2008
Linda - it was a calculated risk all the way. Absolutely worth the chance I took and I would do it again given the same situation. In the end my exposure was 2K - hardly a drop in the bucket when you compare it to the 20K+ I'll be paying in commissions! Very enlightening experience, and I found the best realtors to sell my home as a result of the process - I leave the FSBO process in much better shape than when I started!
0 votes Thank Flag Link Mon Nov 5, 2007
Hi William:

Hate to say I told you so, but. Sorry it didn't work out for you. I'm sure glad to hear your hiring a Realtor. And best wishes with the sale of your property.
0 votes Thank Flag Link Mon Nov 5, 2007
Ha Laurel - my sister-in-law and husband had a gorgeous townhome in Alexandria - they killed when they sold!

For my buyers - in the end, they were not serious buyers. The best number they would offer was 30K less than the lowest fair market value of the home and they justified it by, and I quote: "you paid $270K for this home 4 years ago, you're making plenty on this sale.") They also asked "what happens to my earnest money if we decide to back out of the deal?" Ha, thanks, we'll pass. Kids these days....

The shame of it is - they are well qualified buyers, a ton of money in the bank, and good credit scores. But qualified buyer does not always equal good buyer!

Signing on my realtors tomorrow, we've taken this FSBO as far as it can go...
0 votes Thank Flag Link Sun Nov 4, 2007
Townhomes are only a good investment if the ability to build more of them is limited, ie. the physical area.
Dallas is tearing down old buildings, warehouses, etc. and building too many townhomes. There is no end in site. There is always another old building. They also don't resell easily because the new prospective buyer always wants to buy the "new home". Buyers also needs to consider the hidden cost of HOA fees. They're not deductible. Your salesprice on a townhome is limited by the sales price of the identical town home.

The exception...I once owned a townhome in Old Town Alexandria...outside DC..they couldn't build any more and it's worth 30 times what I sold it for because of the close in location

The value is in the single family home...with a yard. Homes can be made unique.
0 votes Thank Flag Link Sun Nov 4, 2007
One very good thing about the stats: there is less competiton on the market.

That is way COOL!
0 votes Thank Flag Link Sun Nov 4, 2007
The real question is will they be able to buy their dream home after another few years of appreciation?
0 votes Thank Flag Link Sun Nov 4, 2007
Thanks Jodi and John, great info! Even down 1% on average sold price is really not that bad considering the rest of the country. This is another point I tried to stress with this buyer. People want to live here in Bucks - we have the business, the jobs, the lifestyle, the prices are good, and we really are holding value.

They have pre-approval and the downpayment, they sent copies yesterday. They're just working off really bad assumptions on their spreadsheet. They are first-time homebuyers and I don't think they really fully understand the financial advantages of owning. It's a leap of faith from renters mentality. I can only try to educate them at this point and go from there...
0 votes Thank Flag Link Thu Nov 1, 2007
I understand the need to keep consumers motivated and positive, but we also need to be honest with them. Maybe the original list price is a bit higher in our area, but the average sold price is lower. Check out the Market Statistics in Trend/MLS.
For William and this thread - the statistics below are for Richland Twp only, Bucks County PA for the 11 months January - November 2006 compared to January - November 2007 :

Units Listed: 149
Units Sold: 54
Average DOM: 57
Listed Average: $375,969
Sold Average: $362,391
Original List Price (Average): $371,733
Sold Price (Average): $362,391
Differential: 98%

Units Listed: 109
Units Sold: 46
Average DOM: 74
Listed Average: $376,547
Sold Average: $358,036
Original List Price (Averages): $379,399
Sold Price (Averages): $358,391
Differential: 95%
0 votes Thank Flag Link Thu Nov 1, 2007
Well, home prices haven't exactly dropped in our "market". our market being bucks county (central and upper). Nor have they stayed the same. They are up year over year a little over 1%, according to the MLS. Also I would be careful which experts I listen to because every market is very local and very different. Most people on TV are talking about the national real estate market as a whole. I hope this helps.
0 votes Thank Flag Link Wed Oct 31, 2007
Before locking yourself in to a contract, obtain their preapproval info from the lender. Don't hesistate to call the loan officer who signed the docs and have a conversation w/ that person. Also, verify the proof of funds for their down payment.
good luck
0 votes Thank Flag Link Tue Oct 30, 2007
Deborah Madey, Real Estate Pro in Brick, NJ
Thanks Linda and Perry, certainly we have to proceed carefully and have a good feeling about the facts before we proceed. Understanding your buyers can't hurt though - if you can relate to their position, you may be able to create a win-win situation. Any buyer who takes the time to tour your home 4 times is worth a bit of thought investment :) I've been on the other end as a buyer, and I haven't met a realtor that hasn't fought to create the right situation for me ... even more so in this market! People tend to respond much better to "how can we make this work" than "take it or leave it."

They claim to be pre-approved and are putting 20% down on the mortgage - if this is true it will be tough to pass over them if they can qualify these statements! Honestly, would probably prefer to be dealing with a buyer using a realtor in this instance... but I won't look a gift horse in the mouth either. Our offer on the table for them expires at the end of this week, if they're serious they'll hop off the fence.
0 votes Thank Flag Link Tue Oct 30, 2007
Maybe these aren't the Buyers for you. They sound wishey washey and you don't want to take your home of the market for someone who is not so sure about your house. That would set you back and you may miss the right buyer in the meantime. Keep on marketing and the right person will come along.
0 votes Thank Flag Link Tue Oct 30, 2007
This sounds like an unqualified buyer. Qualified buyers don't make crazy decsion criteria. Instead of wasting time wondering why, focus on reaching that person who'd really want to buy your home.
0 votes Thank Flag Link Mon Oct 29, 2007
Great points Jodi & Edmund! I agree that you can't "sell" a home. But you can try to educate and enlighten buyers if you have the opportunity. I know realtors spend probably much of their time sharing expertise and teaching their clients.

In the end, I have a spreadsheet with the numbers that work for me, an acceptable timeline, and criteria for my sale - as much as I like these buyers, the deal hinges on my bottom line.

But you can't help but cheer for these guys and hope they get their dream house! As a realtor, it has to be fun every once in a while to see that look in your clients eyes when they walk into the perfect home.
0 votes Thank Flag Link Mon Oct 29, 2007
Congratulations! Sell it yourself!
You know, I really appreciate posts from a fellow that is so detail-oriented.
Let's take two tracks:
1) You are right one with your questions....you just need "a little help" for free from Trulia.
Based on your need to sell (which is unknown-"that's a hint') You have a buyer that is not certain on what to buy, not sure that your home is that best option, or whether they should by at all.

2) Your problem is that you are trying to solve people's problems with the sale of their home. The truth is that buyers do not care about YOUR situation. That is why you need someone to represent you in the sale of your property. That means someone that knows what they are doing.....

No offense, but based on your post, you do not. Buyers do what is in their best interests. So, by selling FOR YOUR BEST INTERESTS (without representation) , you are in a no win situation. If 90% if buyers buy with a REALTOR representing them, then YOUR theory is that by offering your home to only 10% of the buyers, you will maximize your profit?
Go for it.

I am selling stock...let's say, Google. I offer is to only 10% of the buyers. Will I get the best price? Sure, for MY CLIENTS! Ha Ha!

Good luck!

0 votes Thank Flag Link Sun Oct 28, 2007
Keith Sorem, Real Estate Pro in Glendale, CA
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