Short Sale - advice needed
-
- Posts: 117
- Joined: Mon Jan 09, 2012 9:01 am
Short Sale - advice needed
Hello. My wife and I have been looking at a short sale property. We are renters and have never owned real estate. I have read a lot of past posts about short sales but have a question that I can't seem reconcile in my mind.
The house we are looking at is around 1700 square feet and is listed for 175k. It is the smallest house in the neighborhood and in the best location in the neighborhood. This is about $103 per square foot. The current owners paid 240k in 2007. The next lowest selling price in the neighborhood is 235k for a 2350 square foot house last year to a couple divorcing and unloading. My realtor thinks I need to offer somewhere around 200k for the house in order to be competitive in the bids they will receive given location and price for this school district. This equates to $120 per square foot and would be towards the top end of what houses sell for in this neighborhood. For reference, most houses in this neighborhood are around 2300-2600 square feet and sell between $255k and $300k.
No house has sold for under 230k in this neighborhood, so my question is this: how much does price per square foot matter when you are dealing with the smallest house in the best neighborhood?
The boglehead disclaimer: Our combined household income is $150k, no debt, max out all retirement accounts, and have a full emergency fund and down payment
The house we are looking at is around 1700 square feet and is listed for 175k. It is the smallest house in the neighborhood and in the best location in the neighborhood. This is about $103 per square foot. The current owners paid 240k in 2007. The next lowest selling price in the neighborhood is 235k for a 2350 square foot house last year to a couple divorcing and unloading. My realtor thinks I need to offer somewhere around 200k for the house in order to be competitive in the bids they will receive given location and price for this school district. This equates to $120 per square foot and would be towards the top end of what houses sell for in this neighborhood. For reference, most houses in this neighborhood are around 2300-2600 square feet and sell between $255k and $300k.
No house has sold for under 230k in this neighborhood, so my question is this: how much does price per square foot matter when you are dealing with the smallest house in the best neighborhood?
The boglehead disclaimer: Our combined household income is $150k, no debt, max out all retirement accounts, and have a full emergency fund and down payment
Re: Short Sale - advice needed
So why didn't the owners list the house at $200K? I would be very cautious about your realtor. To me, this house has some problems or characteristics that make it worth less than $175K. Find out what they are.
-
- Posts: 117
- Joined: Mon Jan 09, 2012 9:01 am
Re: Short Sale - advice needed
From what I have been told, the house is priced low to receive many offers. We are not actively searching - the realtor that we are using lives in this neighborhood and once he heard about this property was about to enter the market, told his friend (who happens to work with me). So we contacted the realtor immediately and saw the house yesterday. That is how this all started...livesoft wrote:So why didn't the owners list the house at $200K? I would be very cautious about your realtor. To me, this house has some problems or characteristics that make it worth less than $175K. Find out what they are.
Re: Short Sale - advice needed
Price per SF almost always matters if you look at truly similar homes in terms of location, age and construction quality. This house is considerably smaller than the norm for the neighborhood, so will likely sell for less on a total $ basis. But on a per square foot basis, it will likely sell for more per SF. As a general rule, the price per SF goes down as house sizes go up, in a given location. This is due to several factors, including construction costs and affordability.eddiejov55 wrote: No house has sold for under 230k in this neighborhood, so my question is this: how much does price per square foot matter when you are dealing with the smallest house in the best neighborhood?
The typical buyer who values the location and neighborhood will seek to buy the house below the values of the larger houses, but it would not be surprising to see it get bid up to a higher per-SF price.
The low listing price might be due to it being a short sale, if I'm reading the OP right. The primary motivation is to sell quickly and get out from under debt, not necessarily maximize selling price. If it's an active market, and numerous bids are received, the price very well could be higher than the listing amount.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson
Re: Short Sale - advice needed
If you had a realtor working for you and not for the seller, you could have your realtor do some legwork:
1. Find 5 recent short-sells in the immediate area.
2. Find 5 smaller homes sold recently in the immediate area.
For each of these sales:
3. What was the initial asking price? The final asking price if the home was on and off and on the market?
4. The final sales price?
5. How long on the market?
6. The square footage of these homes.
7. At least 3 tidbits of other information about the sale and sellers.
From the answers you can figure out some things. Knowledge is power.
1. Find 5 recent short-sells in the immediate area.
2. Find 5 smaller homes sold recently in the immediate area.
For each of these sales:
3. What was the initial asking price? The final asking price if the home was on and off and on the market?
4. The final sales price?
5. How long on the market?
6. The square footage of these homes.
7. At least 3 tidbits of other information about the sale and sellers.
From the answers you can figure out some things. Knowledge is power.
-
- Posts: 117
- Joined: Mon Jan 09, 2012 9:01 am
Re: Short Sale - advice needed
Great questions and very helpful. Thanks for the advice livesoft.livesoft wrote:If you had a realtor working for you and not for the seller, you could have your realtor do some legwork:
1. Find 5 recent short-sells in the immediate area.
2. Find 5 smaller homes sold recently in the immediate area.
For each of these sales:
3. What was the initial asking price? The final asking price if the home was on and off and on the market?
4. The final sales price?
5. How long on the market?
6. The square footage of these homes.
7. At least 3 tidbits of other information about the sale and sellers.
From the answers you can figure out some things. Knowledge is power.
-
- Posts: 117
- Joined: Mon Jan 09, 2012 9:01 am
Re: Short Sale - advice needed
deanbrew - this was very insightful and helpful re: short sales! Thanks for responding!deanbrew wrote:Price per SF almost always matters if you look at truly similar homes in terms of location, age and construction quality. This house is considerably smaller than the norm for the neighborhood, so will likely sell for less on a total $ basis. But on a per square foot basis, it will likely sell for more per SF. As a general rule, the price per SF goes down as house sizes go up, in a given location. This is due to several factors, including construction costs and affordability.eddiejov55 wrote: No house has sold for under 230k in this neighborhood, so my question is this: how much does price per square foot matter when you are dealing with the smallest house in the best neighborhood?
The typical buyer who values the location and neighborhood will seek to buy the house below the values of the larger houses, but it would not be surprising to see it get bid up to a higher per-SF price.
The low listing price might be due to it being a short sale, if I'm reading the OP right. The primary motivation is to sell quickly and get out from under debt, not necessarily maximize selling price. If it's an active market, and numerous bids are received, the price very well could be higher than the listing amount.
Re: Short Sale - advice needed
Don't forget lot size. Take a neighborhood with uniform lot sizes. Say the lot is $100k. Build a 1000 sq ft house on it for $100k, and a 2000 sq ft house on the lot next door for $200k. Price per sq ft is 200000/1000 = $200 for one and 300000/2000 = $150 for the other. Bigger house has lower price per sq ft for the same lot. It's math.deanbrew wrote: Price per SF almost always matters if you look at truly similar homes in terms of location, age and construction quality. This house is considerably smaller than the norm for the neighborhood, so will likely sell for less on a total $ basis. But on a per square foot basis, it will likely sell for more per SF. As a general rule, the price per SF goes down as house sizes go up, in a given location. This is due to several factors, including construction costs and affordability.
Re: Short Sale - advice needed
IMO, 200k is rather on the higher end. If the short sale is listed for 175k, then an offer of 175k should be competitive. Matter of fact, you are being magnanimous to even offer that. I don't care how desirable the neighborhood is, it is the smallest house around. Price per SF matters!
Given OP's situation I wouldn't hesitate to offer 175k and live with the outcome. I gather from your post you are not desperately looking to buy, so this is by no means a once in a lifetime opportunity.
Lastly, I would be leery of an agent who is suggesting to offer about 15% higher than the listing price. Sometimes they care more about their commission, just saying...
Given OP's situation I wouldn't hesitate to offer 175k and live with the outcome. I gather from your post you are not desperately looking to buy, so this is by no means a once in a lifetime opportunity.
Lastly, I would be leery of an agent who is suggesting to offer about 15% higher than the listing price. Sometimes they care more about their commission, just saying...
-
- Posts: 941
- Joined: Fri Apr 01, 2011 1:49 pm
Re: Short Sale - advice needed
I can offer one possibility. We sold a rental house last August. We figured the value of the house to be about $240 (give or take a few thousand). At our realtor's suggestion, we listed the house at $229K. We wanted a quick sale and wanted to encourage multiple offers. We got both. We accepted an offer of $239K (and ignored two offers at our asking price). Of course the offer was contingent on an inspection (which I assume the OP would do as well).So why didn't the owners list the house at $200K?
Listing at a lower price seems to be a pretty common selling strategy right now - it sure worked for us. I'd encourage the OP to figure out how much the house is worth to them and offer accordingly.