Analysis
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What Percentage Of Under Contract Homes Actually Sell? |
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![]() This was an interesting question from one of my clients --- relative to whether we should take the time to go look at a property that is currently under contract. Their perspective was that if quite a few contracts fall through, it could be worthwhile to go look at an under contract property -- but if most stay together, then maybe not. As it turns out, most homes stay under contract if they go under contract. In 2009, 818 homes went under contract. Only 77 homes came back from being under contract. ![]() This contract success rate is a bit lower than past years, but much better than 2006!
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Looking For A Dutch Colonial In Rockingham County? |
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Good Luck! There are only two listings on the market right now labeled as Dutch Colonial homes. Let's take a look at what IS for sale . . . . ![]() As you can see, ranches, townhomes, contemporary homes and colonial homes are your best (or at least most prolific) option in Harrisonburg and Rockingham County. Also of note, here's what sold in 2009 . . . . ![]() We find the same leaders -- ranches, townhomes, contemporary homes and colonials. Thus, we have a bit of a chicken/egg dilemma. Are these types of homes being sold because that's what people want, or because that's what is available. Here are the full numbers for those who are curious . . . . ![]() | |
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Starter Home Buyers Increase, High End Home Buyers Decrease . . . And Prices Remain Constant?? |
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Jennifer Chapman, one of my associates at Coldwell Banker Funkhouser Realtors brought some very interesting data to light yesterday. She noticed that there are fewer and fewer homes selling over $300k. I thought I'd take a look . . . . First, bear in mind that the median sales price has gone largely unchanged between 2006 and 2009, showing only a 3.5% decrease. (full market report) This would suggest (in some ways) that we've probably seen a roughly equivalent number of inexpensive and expensive homes selling over the past several years. This actually does not turn out to be true . . . . ![]() I can make plenty of guesses as to why we're seeing these shifts, including:
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2009 Real Estate Round Up: City vs. County, SFH vs. TH |
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Earlier this week I published my monthly market report on the Harrisonburg and Rockingham County real estate market. While my report does examine how single family homes performed compared to townhomes, it doesn't examine how City properties compared to County properties. Let's take a look at how each category performed in 2009, as compared to 2008. ![]() Interestingly, there was a much more significant drop off in the number of City properties (23% decline) as compared to County properties (6% decline). Yet, while fewer City properties sold, they seem to have (marginally) maintained their value better than those in the County. The median sales price of City properties declined by 3%, while those in the County declined by 5%. ![]() Above you will notice that townhomes outperformed single family homes in both measures I've calculated. There was a more significant drop off in single family homes (14%) as compared to townhomes (11%), and there was a more significant decline in single family home median sales prices (5%) than townhome median sales prices (3%). The conclusion here? City townhomes seem to be the general victor here, with County single family homes suffering the most. Interested in a different cut of the data? E-mail (scott@HarrisonburgHousingToday.com) or call me (540-578-0102) and I'll put it together for you! | |
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January 2010 Harrisonburg and Rockingham County Real Estate Market Report: Prices Edge Down Slightly, Declines in Sales Pace Gently Slow |
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Home sales finished out at a respectable level in 2009, showing only a 13% decline from 2008 as compared to the 25% decline in sales pace seen between 2007 and 2008. The area's median price, however, slipped 5% -- the first decline in full year median values that we've seen in this troubled market. ![]() This past month's sales (67 in December) can't be used to predict too much in our market, because December sales were at roughly the same levels in 2007 and 2008 --- with significantly different months and years following those similar December values. That being said, five of twelve months in 2009 showed home sales at, above, or very close to the corresponding month in 2008. This may be an indication that the declining pace of home sales seen since 2005 may finally be slowing. ![]() The local year over year housing inventory has declined slightly, from 828 homes at the end of last December, to 792 homes for sale at the end of this December. That small decline, however, is still not enough of a decline to help the significant oversupply of homes for sale we have been experiencing for over a year. ![]() Read on, and dive into the details by reading the entire January 2010 Harrisonburg and Rockingham County Real Estate Market Report. Click the image below to download the PDF. ![]() If you find the information in this report to be helpful....
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What Type Of Housing Is Being Built In Harrisonburg And Rockingham County |
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![]() One way to take a look at what is being built in and around Harrisonburg is by examining the Harrisonburg / Rockingham MLS to analyze listings circa 2009+. First, or note, a full 14% of listings currently for sale in Harrisonburg and Rockingham County appear to be new construction. (113 homes out of 793 homes). Here's a big picture summary of these new homes for sale in our market:
Also . . . enjoy the first edition of Harrisonburg Real Estate Radio: Home Inspections via Harrisonburg Real Estate Radio [08:38] | |
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Selling For A Profit All Depends On When You Bought! |
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Thankfully, the value of homes in Harrisonburg and Rockingham County hasn't taken a nose dive like has happened in many other markets. As you can see below, modest (normal?) growth in values occurred between 2000 and 2003, unbelievable (and unsustainable) growth in values occurred between 2003 and 2006, and prices became stagnant between 2006 and 2009. ![]() That being said, since we haven't seen consistent growth in home values since 2006, there are some homeowners who are unable to sell their house (after costs) for as much as they bought it. Conventional wisdom pre-2003 said that you should only buy a house if you knew you'd be living in it for 5 or more years. You see, with the principal balance of the mortgage declining SO SLOWLY at the start of a 30-year mortgage, it would take a full five years to have paid down the mortgage enough to cover the costs of selling. As you might imagine from the graph above (or from talking to your friends), some people bought in 2003, 2004 or 2005, and then sold a year later at a tidy profit. The market was going up so quickly that they could sell one year later with no financial detriment because of the high rate of appreciation. Let's take a look at how our market has performed over the past decade by imagining that someone has to sell three years after they buy. ![]() As per the chart above, a homeowner buying 2000 or 2001 would have been experienced a good sized gain. ![]() The gain is starting to be more and more unbelievable at this point. Buying in 2003 and selling in 2006 would have resulted in a whopping $53,000 gain, or roughly $18,000 per year. ![]() While things are starting to slow down, we see here that someone could have bought as late as 2005 and been just fine, given that there was such a big jump in median home values between 2005 and 2006. ![]() OOPS! Wait a minute! A $16,000 loss?? It's true --- if you bought in 2006 or anytime thereafter, and you want to sell your house, you'll need to prepare to do so at a loss, given the costs of selling. The big question: When will the median sales price start to stabilize? When the supply of homes for sale starts decreasing more rapidly than it has, I believe we'll start to see the median price inch upwards again --- though not at the pace it did between 2003 and 2006! | |
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Pondering The Future Of The Harrisonburg and Rockingham County Real Estate Market |
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![]() Over the last few days I have had quite a few discussions with developers, builders, buyers, sellers, and other Realtors regarding the exciting change of pace our local real estate market experienced in November 2009. To remind you of this astonishing news:
All of these are wonderful indicators, and we find yet another one at the top of this post, showing that while online property views (defined below) have been declining over the past few months, they are much higher than could be expected. In fact, there were more properties viewed online in November 2009 than in March 2009. Wow! We would typically expect that most buyers would be looking at properties online (and in person) at the start of the spring "buying season" -- but the graph above shows that there are still LOTS of buyers looking (at least online) at properties for sale. Online property views is the sum of all property views on the Coldwell Banker Funkhouser Realtors network of web sites, including our company web site, and all agent web sites. | |
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The Most Frequently Used Driveway Materials in Harrisonburg and Rockingham County |
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![]() If you're building a home, what should you use as a driveway material? There are a lot of options!
Let's take a look at the most common types of driveways in Harrisonburg and Rockingham County. The data source for this analysis is the Harrisonburg/Rockingham Association of Realtors MLS, so it's an inexact analysis, but can still provide some helpful insights. ![]() The chart above shows that the most common driveway material for single family homes in Harrisonburg and Rockingham County is gravel! Beyond gravel drives, which are likely found mostly in the County, the most frequently occurring driveway is an asphalt driveway. Let's take a closer look at driveways of single family homes in the City of Harrisonburg, to exclude the more "rustic" driveways found on homes further out in the County . . . ![]() In the City of Harrisonburg, a full 1 in 5 driveways is still gravel, though asphalt driveways now lead the pack, with a full 10% greater market share than concrete driveways. ![]() The graph above analyzes "expensive" homes --- those sold above $350k in the last year in Harrisonburg and Rockingham County. Here we find an even more overwhelming share of asphalt driveways, though we also see an increase in the percentage of exposed aggregate driveways. ![]() Perhaps most interesting is that when examining homes sold since Jan 1 2000, we find that most have had concrete driveways. Is this perhaps the sign of a growing trend in our area, or the nation as a whole? Notes: In the last year, 570 single family homes sold in Harrisonburg and Rockingham County (per the HRAR MLS), and the analysis above is based on the 534 sales where driveway data was present and usable. | |
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Are We Turning The Corner Towards More Positive Times? |
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Take a look at home sales activity summarized by Quarter . . . ![]() As you may notice, we've seen a steady decline in the number of residential sales in Harrisonburg and Rockingham County since 2005 . . . until the fourth quarter of 2009. Look again . . . ![]() Please note, first, that the final fourth quarter 2009 sales figure is extrapolated based on data available as of November 30, 2009. So, my data could be wrong --- but I recently made some wild guesses about November 2009 sales (first I guessed 65, then I guessed 76) and they were both too low (the final figure was 82)! If we do see an year to year increase when comparing 2008-Q4 versus 2009-Q4, I think we can get excited about 2010 being the year when home sales finally started increasing again in Harrisonburg and Rockingham County. That being said, I will still allow for skeptics to blame it on the tax credit, or for other factors in the current market. Any skeptics out there? | |
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Harrisonburg & Rockingham County Home Sales Soar in November 2009! |
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Take a look at this graph and see if you notice anything . . . ![]() I notice a few things that are quite exciting: November 2009 home sales were 95% higher than a year ago (November 2008). Furthermore, there was a 30% increase between October 2009 and November 2009, when most other years there has been a decrease between October and November. November 2009 outperformed every other month of 2009 except for June and July. November is typically a very slow month for home sales, but this year buyers came out in droves! Read on for more good, bad, and neutral news . . . ![]() Click here to download the PDF. If you find the information in this report to be helpful....
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Re-visiting 2006 Real Estate Predictions for Harrisonburg and Rockingham County |
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Much has changed in our local real estate market over the past threeyears, and yet, much has not changed at all. Let's examine today'smarket from the context of just three years ago. Back in November2006, my column in the Shenandoah Valley Business Journal includedthese excerpts: November 2006:"Today, many areas of the Shenandoah Valley are experiencing a buyer'smarket, which provides an excellent environment in which to buy a home…Today's buyers have the opportunity to aggressively negotiate on theirdream home." In today's market we find that nearly everyarea of the Shenandoah Valley, in every price range, is experiencing abuyer's market. The supply of homes far exceeds the demand, providingbuyers with plenty of choices and negotiating ability when purchasing ahome. November 2006: "The average 30-year fixed mortgage rate is currently 6.4%, more than an entire percentage point below 2000 levels." Today'srates are as low as 4.75%, with most buyer's rates hovering around 5%depending on their loan program and credit scores. It is indeedremarkable that the low interest rates from just three years ago arenow more than 1.5% lower today. November 2006: "With houses staying on the market longer, buyers have more choices than ever." Inmost cases, houses are now staying on the market even longer than theywere three years ago, providing even more choices for buyers. Thissupply has not yet shown signs of declining, though the sales pace maybe solidifying after several years of declining numbers of home sales. November 2006: "Today's buyers have the opportunity to obtain unprecedented assistance in buying their home." Thisstatement was in the context of sellers being willing to pay closingcosts, or to offer other incentives. There certainly wouldn't havebeen too many people, three years ago, who would have imagined that thefederal government would be offering an $8,000 tax credit to first timebuyers, and a $6,500 tax credit to long term owners of principalresidences. This statement from the past is true yet again, but in anew context – buyers have yet more unprecedented assistance in today'smarket! November 2006:"With so many benefits to homeownership, plus the advantages offered bypresent market conditions, anyone who was considering buying in thenext one to two years should consider doing so now. The future islikely to offer higher prices, higher interest rates, fewer choices andfewer buyer incentives." Three years later, we aren't yetseeing higher prices, or higher interest rates, or fewer choices, orfewer buyer incentives. Thus, there are still great opportunities forbuyers in today's local real estate market --- but with one significantcaveat. Over the past three years, prices haven't fallen, which iswonderful, but they also haven't increased. Today's buyers, therefore,should only consider a purchase if they will stay in their home forthree or more (or five or more) years. The days of recent past when abuyer could sell a year later for a profit are certainly no longer areality. As always, in real estate, context is of utmost importance. Over the past three years, median home prices in Harrisonburg andRockingham have fallen by 1.5%. In a vacuum, this isn't overlyexciting or depressing. Consider that most other areas in the countryhave seen value declines of 20% in the same time period, and it's a bitmore exciting. Consider that our local home values increased by 51% inthe preceding three years (2003-2006), and it's even more exciting! | |
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Reasonable Goals For Buying An Investment Property In Harrisonburg |
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Every investor (or potential investor) comes to the table with different expectations for an investment property that they may choose to purchase. A few examples of this broad spectrum include: Having One's Cake And Eating It Too!
Put more specifically in today's context, most rental properties that an investor could purchase in Harrisonburg today will offer (how exciting!) negative cash flow --- even given a 20% down payment, self-management and self-maintenance. This leads me to two questions every potential investor should be asking.... 1. Should I be investing in real estate in Harrisonburg? If you are seriously considering investing in real estate, Harrisonburg is a great place to buy. While there are still some who believe our home values will eventually, somehow, start falling rapidly, we have seen relatively stable home values over the past several years despite the majority of the country seeing sharp declines. This is likely attributable to our low unemployment, a diverse economy, multiple local colleges/universities, and our proximity to D.C. --- all of which are great economic stabilizers that benefit real estate investors in this area. 2. What should I be buying as an investment property in Harrisonburg? And how should I be buying it? First, you'll need to be patient. As stated above, most properties currently for sale won't be very exciting, even given reasonable investment goals. However, there are, and there will continue to be some properties that can work well --- providing positive cash flow, likely appreciation, a stable tenant base, etc. To properly evaluate such opportunities, however, you'll want to (in my opinion) become comfortable with analyzing the properties and their potential financial benefits through several different lenses (cash flow, tax benefits, principal reduction, appreciation). Read up here for more details. If you are considering purchasing an investment property in Harrisonburg, I'd be delighted to assist you in that process. Get in touch (540-578-0102 or scott@HarrisonburgHousingToday.com) and we can start to discuss your situation and goals. | |
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How Much Undeveloped Land Is Left In Harrisonburg? |
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![]() Using data provided by the City of Harrisonburg, the information below is what I am finding on vacant land in the City of Harrisonburg. Bear in mind that there is a bit more vacant land than referenced below, but I chose to exclude land owned by educational institutions, local government, religious organizations, state government. Vacant Land In Harrisonburg:
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Don't Sell! If You Can Keep Your First Home As A Rental Property, Do It! |
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If you own your first home now, and are looking to move up to your next home --- I urge you to carefully examine the potential benefits (and risks) of keeping your current home instead of selling it. Your first home is likely an ideal rental property, and you can see enormous returns if you are able to keep your current home as a rental property when you purchase your next home. That being said, I know that many people need to sell their current home to use the proceeds of that sale to use as a down payment for their purchase. Scenario #1 -- Sell After Five Years We'll imagine that your home was a townhouse bought five years ago for $110k, which is now worth $155k. In selling the property, you will clear about $42k after closing costs. (Assumptions: 100% financing at 7% fixed, five years of principal reduction, 6% gross closing costs) Net Gain After 5 Years Of Residency = $42,000 As you can see, this is a hefty payoff after just five years. Certainly, even if you didn't need the funds to roll into your next purchase, it would be tempting to "cash out" by selling your first home. Scenario #2 -- Sell After Ten Years (total) We'll again imagine that your home was a townhouse bought five years ago for $110k, which is now worth $155k. However, instead of selling the property, you rent it for $875/month, with a super conservative 1% per year increase in rental rate. We'll also assume that your insurance, property taxes, and property value go up 3% per year. If you keep the property for another five years after moving into your new home, and then you sell it, in addition to getting the roughly $42k out that you would have netted after five years, you'll also likely experience:
Scenario #3 -- Sell After Thirty Years (total) But what if you kept it all the way until the end of the 30 year fixed rate mortgage? Then things would be looking excellent! In addition to getting the roughly $42k out that you would have netted after five years, you'll also likely experience:
The Risks Certainly, as in any investment scenario, there are risks. Here are a few:
The Benefits I believe the benefits CAN outweigh the risks, depending on your own personal financial scenario. Instead of cashing out after 5 years for $42k, you can have tenants pay off the remainder of your mortgage, while you get to enjoy the monthly excesses as rental rates go up, and you eventually get to realize the appreciation of the property. After 30 years, you are likely to have received a net of $353k instead of just $42k. Wow! | |
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November Home Sales Soar In Harrisonburg, Rockingham County |
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A few days ago I mentioned that I thought November sales would be strong, with likely around 65 home sales. I think I was wrong. I think we're going to see a big rise in home sales in November. We've already seen 49 home sales between November 1, 2009 and November 19th, 2009 --- which exceeds all of November 2008 sales. And if I extrapolate out based on how many occurred in the first 19 days of November last year, this is what we find . . . . ![]() I'll try not to dwell on this too much . . . well, actually, maybe I will! | |
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Did Our Area's Median Sales Price Increase Because Bigger Homes Were Being Built And Sold? |
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This is another great question about the Harrisonburg and Rockingham County market! The graph below shows how the median sales price has increased over the past 10 years (the blue line). ![]() The hypothesis would be as follows:
![]() First, check out the graph above. The median price per square foot has tracked at a relatively similar growth and decline pace as the median sales price. If the increase in price had been a result of more sales of large homes, we would have seen price per square foot stay relatively level. We do not see that. Second, if the above hypothesis were true, we would see a significant run-up in the number of large homes sold up until 2006, and then a decline. Take a look . . . This graph shows all home sales: ![]() Next, we see that "large" homes didn't actually decline as much as the rest of the market between 2006 and 2009: ![]() And if we create an overlay of the two graphs we'll note that despite the vast number of large homes that are for sale, that segment of the market has actually picked up pace in the recent past as compared the rest of the market: ![]() | |
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We're Seeing The Effects Of The $8,000 First Time Buyer Tax Credit In Harrisonburg, Rockingham County! |
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I rarely make real estate sales predictions --- mainly because in the rare occasion that I do, I'm usually wrong. More on this in a few days. That being said, I believe we're seeing the specific effect of the $8,000 first time buyer tax credit (that was recently extended) here in Harrisonburg and Rockingham County. Check out how November sales figures will likely play out . . . ![]() We've already seen 34 home sales in Harrisonburg and Rockingham County in the first 17 days of November. Compare that to how many occurred in Nov 1-17, 2008 versus Nov 18-30, 2008, and I have extrapolated a final sales count of 65 home sales this November. I will likely be wrong --- I think it will be even higher. The second version of the first time buyer tax credit was to end on November 30th, so there are quite a few purchasers already in the queue waiting to close at the end of this month. Do you want further evidence? The median sales price of the homes that have sold this month is $177,623, compared to the year to date median of $190,000. We're seeing more inexpensive (first time buyer type) homes selling this fall. Any counter prediction out there? What do you think? And what do you think we'll see in those typically stagnant months of December and January?? | |
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Do Townhomes in Harrisonburg Hold Their Value? |
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This is a fascinating question, asked by a potential townhouse buyer who is concerned that townhouse values might be more volatile than single family homes because there have been so many townhouses built in the Harrisonburg area over the past several years. Here is my best attempt at evaluating how townhouses in Harrisonburg hold their value compared to single family home . . . Most of the new townhome communities in and around Harrisonburg have been built during the past six years, so I began by comparing how the median price of townhomes changed over the past six years (2003-2009) as compared to the median price of single family homes. I found that townhomes increased in value by 51% during this time period, while single family homes only increased in value by 42%. ![]() Next, I thought it might be interesting to see how each property type has fared in the most recent three years (2006-2009) in a tough market with very little price appreciation. Comparing median price changes between 2006 and 2009, I found that townhomes increased in value by 1% during this time period, while single family homes LOST 8% in value. ![]() Finally, just for good measure, I thought I'd stretch back even further and look at how the median prices of townhomes have changed over the past nine years (2000-2009) as compared to single family homes. I found that townhomes increased in value by 83% during this time period, while single family homes only increased in value by 70%. ![]() Having examined value trends in a 3-year, 6-year and 9-year window, I'm quite comfortable asserting that townhomes grow in value, and maintain their value better than single family homes. Or, at least, they have in Harrisonburg and Rockingham County for the first nine years of this decade! Median price data source: October 2009 Harrisonburg & Rockingham County Real Estate Market Report | |
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The Puzzle (To Buyers) Of A Low List Price |
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![]() It can be difficult to price property as a seller, but another interesting puzzle is how a buyer should respond to a low (super-low) asking price. There are several scenarios where a list price might be quite a bit lower than expected:
The problem, of course, is that buyers are making a decision about an asking price in a vacuum! They don't know if there will be multiple offers, if any of the offers will be as high as asking price, if they will be above asking price, etc. The best solution, in my mind, is to use a relic from the recent past --- the escalation clause. This allows a buyer to make a bid that they hope will win the day, but also to provide an automatic method for increasing that offer should another outbid them. More specifically, if a house is listed at $125k that we think should sell at $225k, a serious buyer might want to:
My question, in that situation, is this --- if the above referenced property were not one with a low list price, but instead were listed at $229k, would you not be highly interested if you knew you could negotiate it down to only $185k? The issue at hand, I believe, is that it is hard to be comfortable with exceeding the asking price of a property in a buyer's market. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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