Open housing tip: similarity helps
When a prospective buyer is just getting “warmed up” to the marketplace, he/she will frequently begin by bopping into some open houses on a Sunday afternoon. This is a fairly good way to get some exposure and calibration about what the market is bearing.
However, an open house tour that mixes apples, oranges and umm…lemons is going to be confusing. The prospective buyer needs to choose his/her open houses in a strategic way. Let me explain:
1. Ultimate sale price runs fairly close to this formula: Size + Condition + Location (+/- sometimes for style) = Price.
2. Asking prices are created by the seller and the seller’s agents. The asking price can be way, way above, near, or even, or a bit below the final sale price.
3. Price varies dramatically from town to town. More expensive towns, by and large, have school systems that have a better reputation than less expensive towns. Price also varies wildly by condition. Location, on a micro level, matters too; houses in too dense an area, on busy streets, or too near commercial areas are worth less than their quiet comparables.
Therefore, the open house tour should be searching on one axis at a time. Either stick to a price range that is fairly narrow, stick to a town, stick to a type of house or size of house, stick to similar conditions – (avoid new construction and fixer-up in the same tour.) You get the idea.
If a buyer jumps from an “A school” town to a “C school” town, and that buyer looked at a 1200 SF house in the A and a 1500 SF house in the C; the C house may still be cheaper. What did the buyer learn? Nothing.
However, if the same buyer goes to all 1200-1300 SF houses in both towns, he/she will get a better sense of two things: Is 1300 SF big enough? How much more will it cost to live in the A town? By doing this kind of open housing (and checking the sale prices a month or two later), a prospective buyer can gather useful information about what the market is bearing.
Now that the spring seems to be pushing up from under the mulch, take advantage of the variety of open houses and choose a tour that teaches you something.
Did you confuse yourselves at open houses? Do you have anything to tell the newbies?
Open housers, what are you choosing to see and why?
