Do not be ashamed to make any offer for what the property is worth to you. Sellers should be happy to receive ANY offer in this poor housing market. One mistake sellers make is quoting what they think a property is worth according to an appraisal -- often many months or years old. A mistake Realtors make is 'buying the listing' by listing the property at the inflated price just to please the seller and obtain the listing. That results in properties that sit on the market for months and years with no shows.
An appraisal does not set the market value of a home. The market value of a home is only what someone is willing to pay for the property in a particular market. There are various types of appraisals, all yielding very different values. However, no type of appraisal actually determines the market value of the property.
In this very slow 2008 housing market, homes are now selling for tens of thousands to hundreds of thousands of dollars less than "appraisal", tax value, and/or mortgage value. This fact is very hard for sellers (and Realtors) to swallow.
The longer a property is on market in this housing crisis, the more of a loss the seller will be forced to take. Most sellers and realtors don't understand the severity of the current housing market, so thousands of properties are sitting on the market for months to years with no shows, no offers, and no prospect for sale.
We're seeing $500K houses that are being reduced by $200K, and they're still not selling. Unfortunately, the housing market has not bottomed out yet, and it will not do so for several years to come. Realtors are giving their clients false hope by telling sellers if they sit on their nest egg for just a bit longer, they can get their price. That's not going to happen, and the seller may face financial ruin during that nesting process.
Sellers, if you need to sell, start slashing the prices now, as the road to recover will be long and slow. Buyers, if you like a property, make an offer for what it is worth to YOU. Buyers, remember, that Realtors are NOT your best reference for anything right now. The market is so depressed and Realtrs are so desperate for a sale, that you simply must do your own research. Don't place your future in the hands of the desperate.
Consider the Glenview Countryside or Manors west of Milwaukee, there are plent of 10,000-12000 sf lots and in the 2004-2006 period, the price for teardown opportunities ran from $280,000-$325,000 to the low to mid $400,000 range, with expectations to sell homes from $1,150,000-$1,350,000. It turns out that so many rookie builders entered the market at the same time, with no real idea of the supply when they came to market with the new product, and created a glut. This supply would sell eventually, but became worse with higher prices for motor fuel, declining consumer confidence, and a crisis in the mortgage markets. Tough darts.
Glencoe sells 28-35 new homes annually. In 2004 developers bought 74 lots and sold 28 new, in 2005 they bought 55 and sold 35, 2006 saw 34 lots and 25 new homes sell. Many Glencoe builders thought they saw better opportunity in Northbrook , compounding liquidity problems. Last year the auctioneers had their best year and this year builders many are in foreclosure.
So, to answer your question about pricing strategy, a careful analysis may call for as much as 20-30% off of list price, . I have data on 1500 new home lot acquisitions in these markets, and 10 years of data for the New Trier feeder towns, and would be happy to help you sort it out. It may have been SunTzu who said " there is a great chaos under heaven and the situation is excellent".
A CMA for a buyer is essential to determine whether the home is fairly valued by the seller based on current market conditions. One thing to remember, a seller knows their specific property (yes, they can walk through opens in the area and get a feel for competing homes but that doesn't always happen) but the buyer knows the inventory and has physically walked through each home in the area and surrounding areas as they narrow down their search.
The buyer through their agent often has accurate information to submit to back-up their offer and ensure a seller understands where the buyer is coming from. A buyers CMA can go a long way towards helping a deal happen. A buyer feels comfortable with their price knowing they've done their homework and a seller gets a snapshot of the market from another perspective that may make them realise there not the only game in town.
If a deal can't be reach due to price, everyone respectfully agrees to disagee and moves on.
It is quite normal in this housing market for prospective buyers to offer $75K-$100K less than asking price of a $495,000 home. Many buyers are now using the tax assessed value as a baseline bargaining tool.
THE MARKET DETERMINES THE PRICE. So if a property has been on the market for a very long time, the property simply is priced too high. The longer a property sits on the market, the more likely buyers will submit low offers ... the longer, the lower in this market.
Some realtors and sellers wish to believe that the market has hit bottom. No, the the housing market is going to get much worse before it gets any better all across the country, and buyers are offering substantially less than listing price and fewer are budging with counter offers. Those sellers who are refinancing in an attempt to wait until the market picks us are in for quite a surprise, as the bottom of the market will not hit for years down the road.
Sad but true, an incredible number of homes are now selling for less than tax value and less than mortgage value.
Zip year month # sold list price sales price DOM
60025 2007 Sep 30 $510,743 $467,225 130
60025 2007 Aug 53 $649,928 $595,149 132
60025 2007 Jul 59 $579,004 $529,101 124
The list price and the sales price is an average for all the properties. In Sept using those numbers, the result is 91.5%. But some recent sales would be:
720 CHATHAM that sold for $2,599,000 which was 95% of it's asking price in just 32 days on the market but 865 THORNWOOD sold for $958,500 which was 83% of the asking price and it was on the market for 378 days. Then you have 4144 COVE LANE - Unit: B that sold for $196,000 which as 99% of asking price in 106 days and 1648 GREENWOOD ROAD - Unit: 1648 which only got 80% of it's asking price for a final sale in 153 days for $200,000.
As mentioned, you need to look at a case by case basis. Sorry, I do not have the statistic that averages each homes ask vs list which could be dramatically different than all homes ask vs list.
Market data will show the difference of last asking price vs. closing price which will give you a percentage around 5% off of ask. The problem with this is many of these homes were on the market for months & reduced their price by 10% before they finally got an offer on the last listed price.
Although the percentage stat for ask vs. close helps, each home has to be looked at in a case by case. Some homes come on the market priced to go & some are really over inflated.
This is the market that selling or buying a house depends on the flexibility of the individual no matter what area do we live. In the north shore area, there are still so much demand since many people weather they are starting a family, or already have developed a family have so much desire to move in. The houses that are taking more time to sell in your area, is mainly because they are not priced right in todays market.
If you have further detail questions, please just ask or email me.