You have a price in mind, now what?

Rona,

I'm a buyer in Dorchester. Yup, Dorchester. I want something bigger than a shoebox and I want to stay for 5-10 years. I don't want to pay $1.5K a month for daycare, so I want an au pair. So I'm looking at Eastern Dorchester.

I found a condo I really like on paper--going to see it on Saturday. Seen a lot of places in this market and done all the things you suggest in this blog.

One big problem--when I put in the range of rooms, square footage, etc. there just aren't comps to go by. Most are at least 9-12 months old. My buyer's agent has pulled stuff up for me too--but more of the same. Not a lot of recent sales to go by.

The price has dropped a lot--the sellers bought in '92 for a staggering steal, divided their home into a 2 family. We'd be the first owners of this place as is--so no price comparing there. The first floor unit (which is 2/3 the size of the one we want bought a year ago) is 1,440 sq feet and sold for $275,000.

So I know my buyers--flexible on price and eager to sell--have come down from their original asking price which was $120K more than it is now...but what do you do when the comps are old, the swing in square footage goes from $160-$250 per square foot........

Sure, I can ask my agent--but he has a stake in this. I think he thinks its a super deal. Honestly, I can't find anything to justify a lower asking price--it really seems like a crazy good deal for new construction (place remodeled last year). But I'm concerned that the lack of comps indicates something sinister's a foot.

Your thoughts? Or am I being paranoid and reading too many commenters on this blog who think that all people who buy now are uneducated buyers? Are there other places to do homework?

That's a stumper, Mr/Ms commenter.

You can see what happens in a situation such as this. The sellers themselves made a "guess" at the value of their property and were off, a lot ($120,000). You could always take last year's price and drop 10% ... if you think overall prices in Dorchester dropped 10% during the past year. But that's not going to help too much. I agree, your agent has a stake, but if he/she gives you data for all sales in DOT, last year or last six months, then you can do the analysis, not him/her. Don't ask to see just three or four comps, ask for them all (your agent will groan, but do it). An appraiser will face the same sort of trouble you have, so be concerned about getting a lender, too. Keep us up to date on what happens!

have you looked up the seller's mortgages to see how far they are into this house?
Perhaps now it's in short sale?

My agent gave me a lot of "comps" but most of them were active listings. I don't put any stock in asking prices in this market. I'm finding a few more thanks to Zillow....and the deal looks great if you have a mentality of a few years ago, but might still need some improvement.

Of course, there's condition to consider and many of these under agreement/sold places are very, very distressed.

The seller's shouldn't be in any distressed situation--we actually inquired about rent-to-buy as well--and they want to sell fast. They bought in 1992 for $100,000. The place was single family then--7 beds and 2.5 baths. They sold the unit below them 03/12/07 for $275,000, so they should have their mortgage paid off.

So you can look up people's mortgages? How is that done?

As for the rest of Rona's questions:

Is there suddenly a lot of sales in a complex? No.
Or in a neighborhood? A lot of activity, but not many people closing deals--this is a bad market and its Dorchester, so I'm sure people want a deal/think they can get a deal in Cambridge or Brookline instead.

Is the town and neighborhood stable? going down? going up?
Going all over the place--some people seem to buy expensive recently and there's distressed properties too.

What is average time on the market and how is this house fairing?
Been on market 190+ days. Seems pretty long to me.

What is the price drop history?

8/11/2007: $450K
8/25/2007: $429,900K
1/12/2008: Expired
04/10/2008: $379K
04/30/2008: $345K

4 beds, 1 den, 1.5 baths, 2100 sq feet, newly renovated in 2007

Are there lots of places like this sitting on the market?

Lots of smaller condos, but none this large I can see. With this square footage a single family home is more common for the size. One example, a similar sized unit did sell in Feb 2008 for much less per square foot, condition unknown, it was a single family home at $88.07 per sq foot, built in 1776. My guess is that it was in poor shape.

So these are my questions:

What defines a good comp?

Mileage-- 0.2, 0.5, 1 mile, same Zip code?
Purely square footage more important than house-type?
In a falling market, look back no further than 6 months, 9 months, 12 months?

1) for comps, recent sales mean a lot more than what's on the market since obviously you'll never know if those listed currently will ever sell;
2) if your agent works for a larger company ask him/her to look in their files for other sales in the same neighborhood, including under agreements - by doing so, you can see what others are paying;
3) within .2 miles for sure; above 1 mile, in Dorchester, is irrelevant;
4) you may have to include up to six months, since jan - april were slower, so include the fall, 2007;
5) also, you have been looking in the neighborhood at the competition - how does this one compare? by now, you have a good idea of "value"; if you think this one is the "winner", and can afford the monthly payments, then sounds good to me!

Savvy buyers know to go direct to the listing agent. That way they can negotiate a better deal on the price by asking the agent to reduce their fee. No real need for them to use a buyer's agent if money is more important than service.

Ah...but, I'm a first time home buyer. And I wanted a buyer's agent for at least this first foray in the real estate world. Especially, especially in this market.

Lucky for me, unlike a lot of my peers who I know who got married and bought homes right away (either they had savings from accounts their parents had set up for them, or got gifts, etc) are underwater and can't move from their condos to single families to start their families. None of them used buyers agents either--I meet with sellers who bought during this time and its painfully evident that they overshot, buying even over the percentage rate prices increased 2001-2006. But then again, hindsight is always 20/20.

Buyer's agents do have their time and place. That being said, its my job to do my own due diligence and I'm somewhat of a perfectionist--so its always interesting to throw my own thoughts out there.

A.B-G., did you get an answer to your question about looking up mortgages and sales history? Simply go to www.masslandrecords.com

You can obtain the original mortgage(s) by running a search by property address or owner's name at www.masslandrecords.com. Dorchester/Boston is in Suffolk County. Of note: it won't tell you how much of the mortgage has been paid off -- although there may be a partial discharge for the other unit. Further, if there are multiple mortgages, also look for discharges to see which ones are outstanding. One additional note, if it looks like there are multiple active mortgages (i.e. without discharges), then it may be that a discharge was improperly recorded.

John, #6
"Savvy buyers know to go direct to the listing agent. That way they can negotiate a better deal on the price by asking the agent to reduce their fee."

And that agent would most likely say "No!". The seller's agent and the seller negotiate a commission, in writing, for a set period of time. If there is no buyer's agent involved, the selling agent keeps the entire commission, the amount agreed upon in the contract. Very occasionally a selling agent will take a less commission if there is no buyer agent but that is very rare. Not many agents would want to do that as taking on both sides of the deal is more work.
Buying a home without your own agent does not save you money.

With all due respect, A.B-G., there's only so much analysis you can do. This home you're looking at is unique in a sense that it's "new" within an older home. There aren't going to be many comparables, as you've already discovered. You can compare by square footage, or home style, or lot size or location, but when it comes down to it, it's your gut feeling. A home's worth what the buyer is willing to pay for it. Is this place going to make you happy and are you going to stay there for a long time?

You can only analyze and re-analyze to a point and then you have to bite the bullet or walk away. What is the assessed value of the place? Now, before everyone jumps on me for saying that the assessed value has no meaning, it should give you at least a ROUGH IDEA of whether you're overpaying for this place by 100K or not.

It's nice to know you payied rock-bottom for this place but how long are you going to wait for that to happen? You have to pay what you're comfortable with and let go of the fact that you "coulda paid" 5k less or whatnot.

Thanks Marcus and MWest! You learn something new everyday!

I think ultimately we're going to rent in the neighborhood first. That way we know if the location is for us and we can see what the market does. The rental will be month-to-month, so that'll give us a lot of flexibility!

#10

Sally-- ever hear of modifying a contract? It's not the Ten Commandments. As for doing both sides of the deal being more work--- what's worse: twice the work and a commission or half the work for nothing?