The fiction of asking prices
Thursday and Friday, this week, I’ll be posting the asking price and the sale price of single family homes which sold in less than a week for the past six months. These were all hurry-ups.
But first, consider that asking price is an awful measure of whether a buyer is getting a good deal. I contend that asking price is a fiction created by the seller or the seller’s agent or both that reflects the wishful thinking of the seller or the seller’s agent, or both.
For a seller or listing agent to identify a price that is compelling for a buyer is both science and art. It is not so easy to finding a price that will make a number of buyers jump. The masters and mistresses of the bidding war do just that.
The ones who do it well are very good at Comparative Market Analysis (CMA.) It’s done by looking at the properties that are most like the one for sale, the “target.” The like-kind properties’ prices are then adjusted so one can compare apples with apples, by deducting value from the target for things that are worse and adding value to the target for things that are better.
Once they establish a market price, they list the house at or just below the market value, where they expect a number of buyers will respond. The risks: if the price is too high, no war; if the demand is lower than expected, it is hard to bring the price up again (although some do it.)
I do the CMA on the buyer’s side to help them establish the point where they are overpaying for the house. By knowing the walk-away point, a buyer can go into a bidding war without losing his/her/their head.
The opposite of a hurry-up is an overpriced listing. I have seen asking prices come down over $100,000 on properties under $1M every year. That is the other reason that a buyer needs a CMA. Would it be a bargain to save $50,000 off the original asking price of some of these?
These houses sold in the past six months. They were on sale more than 250 days in my towns.* Data from MLS, excluding short sales and foreclosures:
Original asking price//Sale price//Days on Market
$390 / $210 / 692
$274 / $175 / 366
$369,9/ $250 / 320
$338 / $244,8/ 246
$359 / $261,5/ 295
$339 / $265 / 308
$315 / $270 / 268
$369 / $265 / 260
$405 / $275 / 254
$322,9/ $270 / 283
$457 / $326 / 294
$384,9/ $339 / 279
$419,9/ $320 / 277
$499 / $355 / 329
$420 / $342/ 278
$429 / $352,5/ 686
$449,9/ $385,250/ 343
$458/ $385/ 402
$499,5/ $400/ 346
$569,9/ $405/ 624
$629 / $415/ 315
$482,9/ $425/ 310
$519 / $439/ 273
$519 / $460/ 251
$650 / $480/ 294
$599/. $500/ 291
$514 / $494/ 303
$519 / $510/ 258
$669,9/ $515/ 281
$569 / $530/ 266
$599 / $500/ 331
$657 / $535/ 319
$659 / $520/ 289
$629,9/ $535/ 260
$890 / $553/ 493
$629,9/ $570/ 417
$699,9/ $570/ 591
$649,9/ $579/ 283
$665 / $595/ 338
$750/ $630/ 389
$925/ $635/ 586
$750/ $663/ 445
$1.1/ $580/ 589
$829 / $680/ 224
$779 / $716,5/ 252
$949,9/ $675/ 378
$929/ $765/ 482
$995 / $815/ 922
$1.099/ $800/ 264
$1.025 $860/ 274
$1.499/ $854/ 590
$1.199/ $955/ 275
$998 / $962/ 320
$1.945/ $980/ 216
$1.35/ $950/ 448
$1.35/ $995/ 909
*My towns are Acton, Arlington, Bedford, Belmont, Brookline, Cambridge, Concord, Lexington, Medford, Natick, Needham, Newton, Somerville, Sudbury, Waltham, Watertown, Wayland, Wellesley, Winchester.
