Tag Archives: property

Are sales really “failing” to sell?

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(From near the end of this post: “Looks like of the 1,081 combined pendings since 6/1/09, at least 21% are short sales. But of the 1,379 closed in 30 days, less than 2% were closed short sales.”) Read full post for more info. That indicates a HUGE failure rate on Short Sales, though some of the variance could be attributed to other factors.

It seems that since the mls removed STI (subject to inspection) as a status, more pendings are failing.  Is this partly because we are now counting the same property twice, and so only 1 closing for 2 pendings in many cases?

1) IF it is first “Pending Inspection” or “Pending Feasibility” study – Every house that is put into “pending subject to inspection” will “fall out” into “pending”, before it goes to “Closed”.

2) Likewise a large number of bank-owned sales are previous listings that may have been pending as short sales.  They DO sell, but by the bank seller vs the owner occupant seller. The house IS sold at the end of the day. We are just showing two pendings for that one sale, with one closing and the other one “failing”, due to the change of seller name from owner to bank.

The only way for us to know this is to track them differently going forward. There is no way to get prior stats of the switch out from Pending Inspection to Pending or failed short sale = closed bank-owned sale, without looking inside each transaction by hand.  Too cumbersome.  But in recent history I believe these are clearly marked and can be identified for individual study, so if we begin now, we should have some really good data as time moves forward.

Today is the first day of the rest of our…research. Let’s begin on the “right foot”.

I’m going to go to the beginning of June, assuming anything that “went Pending” on June 1 hasn’t closed yet.  We can turn it into graphs after several weeks of raw data are obtained. Sticking to “Residential Only” (which in Seattle includes townhomes and on the Eastside does not, by and large). Most stats available are for SFH, such as on Seattle Bubble, so I will exclude “condo” and other types of property. I will also exclude manufactured/mobile homes and houseboats, which may have different #fail as to finance issues.  There is also a status called “Pending BU Requested” which indicates the agent is thinking the buyer in escrow may not close and is looking for BU offers.  I am going to show them separately as they don’t “fall out” into another Pending status before going to Closed…but should indicate a higher expectancy that the sale will fail.

In future posts containing these Pending stats, I will link to this post and not repeat the parameters each time. If anyone disagrees with the parameters, speak up so we can make the changes at the beginning together.

King County: Went Pending since June 1:

Pending = 456  (PI – 499, PF – 6, PBU – 120)

Note: a property can’t have two statuses at the same time.  So the 456 “true” pendings, are not also contained in the other categories.  PI used to be STI-subject to inspection. PBU is generally reserved for properties expected not to close with the current buyer who is in escrow. PF always had a high fail rate as the buyer is saying I only want to buy it IF…”. PI and PF should eventually move to “Pending” and only counted there. PBU we will try to break down further:

89 of the 120 PBU (Pending BackUps) are noted as “Short Sales”

7 more appear to be short sales, but some with prior lienholder approval

Many of the remaining properties in PBU are also short sales, but the field is new and some are not yet using it properly, especially if the property went pending since 6/1/09 BUT was listed long before the SS field was implemented. This data should improve over time. For now note that MOST of the 120 PBUs are Short Sales.

In addition, at least 135 of the 499 Pending Inspections are Short Sales.

Closed in the last 30 days – 1,379

Best I can tell, given pendings are closing in longer and undertermined timeframes, we can’t study a relationship between recent pendings and closed sales. Unless someone has some ideas here.

But at least we can track and see if the “true and full” Pendings are increasing or decreasing, if the short sales are increasing or decreasing.

Let me check for one more thing.  How many of those closed sales were noted as Short Sales. WOW! only about 24.  There you go…as I’ve said before, A Short Sale is not necessarily for sale!

Looks like of the 1,081 of combined pendings since 6/1/09, at least 21% are short sales. But of the 1,379 closed in 30 days, less than 2% were closed short sales. I’m going to leave this here, but also bring it up to the first paragraph.

Now that you can see how we will be able to break down the stats into the future, your thoughts on meaningful arrangement of data much appreciated.

Seems to me we need to note closed since 6/1 here (451) as Pendings will drop as they are Closed.

The primary purpose of this post is to show you what data is available, so that you can request a customized format in the comments below this post. (I am going to tag this “Sunday Night Stats”, just so that tag will pull up the full year and a half of my data related posts. You can get more data in this link of Tracking the Market.)

Required disclosure Stats are not compiled, verified or posted by NWMLS

UPDATE: I am compiling median prices and price per square foot of “normal” sales vs. short sales and bank owned.  I just found a drop down vs. check box for identifying bank owned properties.  … link HERE to the additional data . Breaking it down to North King vs. South King. There is a huge variance in pricing and the distressed sales are not dragging down other property sales “to their level”. Though I do think as time goes forward, identification of distressed sales will be more and more accurate as the new required field is used often and properly from here forward.

Why are Banks Setting the Opening Auction Bid Below The Principal Balance?

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I attended a foreclosure auction in Bellevue, WA last week to discover if the rumor was true that banks are opening their bids below the amount owed.  I received confirmation from three professional investors that yes, the banks have been doing that, it’s no secret, and there seems to be no discernable pattern.  It’s not one particular bank or lender, it’s not particular types of property or in any specific area. It appears to be random.

In addition to the 92 active trustee sales scheduled for that day in Bellevue (auctions were also going on in other King County locations,) there were 81 postponements.  Only a few of the trustee sales attracted bidders, and the rest were deeded back to the bank.  Out of the 92 active sales, 25 had opening bids below the amount owed to the bank.

Why would a bank or lender set their opening bid below the amount owed?

Banks and lenders have duties to their shareholders and investors to maximize profits and miminize losses (well, at least they use to.) If opening bids are set LOWER than what’s owed, perhaps the banks have already tallied their losses, realized that if they had to take back the house, get it cleaned out and cleaned up for resale, pay a real estate agent their commission to sell it, pay for title, escrow, excise tax, utilities, and any other carrying costs,  they might as well sell it at a discount at auction.  But maybe there are other reasons.  I wondered if the banks were trying to keep more REO inventory off the market in an attempt to prop up home values for their existing REO inventory.  Maybe appraisers can ignore trustee sale prices in their reports.  Not knowing the answer, I emailed three appraisers for help and here’s what I learned:  Appraisers need to mention trustee sales in the neighborhood if these trustee sales make up a significant percentage of available comps because they are legitimate sales even though title is transferred using a trustee deed instead of a warranty deed.  If an appraiser choses to ignore these, he/she will run the risk of having the appraisal run through an “enhanced review” process in order to catch trustee sale market activity.  If a trustee sale is a significant comparable sale, it can be used. The requirement to use closely comparable trustee sales as comps can also vary based on the requirement of the lender and investor.  It may not be absolutely required but it may be in the appraisers best interest to mention trustee sales. Thanks to Jonathan Miller, Shane Leady and Richard Hagar for teaching me something new today.

That still doesn’t explain the phenomenon of banks undercutting their own principal balances at the auction.  My theory is that banks are relying on third party information such as a mini appraisal or Broker Price Opinion (BPO) prior to auction.  If the BPO suggests that the outstanding principal balance is so high and out of range as to likely attract no bidders at auction, then the banks have nothing to lose by setting the opening bid closer to or significantly lower than the principal balance owed.  If no one bids at auction, they’re still only out the money they would have been out anyways and on the upside, if the low opening bid attracts investors, then perhaps the bidding will rise closer to the payoff.  If not, they have an immediate loss that could be significantly LESS than losses that would add up over time, having to carry the REO on its books for months of marketing time in addition to the other costs mentioned above.

If banks are undercutting their own payoffs, then why isn’t this phenomenon more widely publicized?  Okay, so we know that bidding on a home at a trustee sale is too frightening for most first time homebuyers but still, if more people know about this, then maybe there would be more folks showing up at the trustee sales and bidding those homes UP, thereby reducing the banks losses.  There certainly is NO shortage of tall, well-groomed, good looking, muscular investor gurus in shorts showing off tanned legs, even though it was only 63 degrees outside hanging out at foreclosure auctions with all kinds of downpayment solutions to offer newby real estate investors:  “We have zero down financing available for the right investor!” and “We have private hard money financing available for your purchase and you can refinance out of that loan in 30 days….My mortgage broker is right here, let me introduce you to her.”

Maybe the banks aren’t publicizing their low bids because they don’t want to bring buyer attention away from purchasing their REOs or short sales, knowing that investors are the ones who typically show up at the auction anyways.  The banks also have a vested interest in keeping traditional buyers focused on MLS listings. 

If I owned stock in a bank or lender that was undercutting their own payoff at auction, I’d want to be darn sure that this practice was saving the bank money and not hiding something else such as higher losses to be pushed on into the next earnings report…or the next stress test.


Foreclosure Auction Video Part 1
April 24, 2009
Bellevue, WA
Here is the rest of the auction.
Special thanks to Phil Leng for introducing me to all the investor bidders.

Can you price your house at land plus structure?

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Larry asks: ” Isn’t it too simple a model to look at the sale price of a property by looking at the square feet of the structure? A property around Seattle, correct me if I’m wrong, has about half of its value in the land, and half in the structure. If real estate appreciates or depreciates. it’s the land that goes up and down, not the structure, right? I understand that $/sqf is an index that varies with property value, but this doesn’t seem to reflect the reality that it’s the land value that’s going up and down, which has only a loose relationship to house square footage.  Or is it just not workable to try to do a more complex calculation? My concern is that when you have an unusual situation with a large lot, and 2/3 of the value is in the land, this method will give erroneous results.”

Let’s deal with this sentence first and get it out of the way “A property around Seattle, correct me if I’m wrong, has about half of its value in the land, and half in the structure.”  No, not true.  One can not even begin to generalize, but a good rule of thumb for builders is that the new house will sell for 3X the lot value.  But that is ONLY if the lot was worth buying in the first place.

If your land has value separately from the structure, then your structure often doesn’t have any value. When your structure has value with the land on a combined basis, then the (extra) land can usually only add 10% more to that value unless the lot can be split into two or more lots.

If a builder might want the land, then yes, the value of the land is part of the valuation process.  If a builder wouldn’t want the land, then no, the land does not “value out” except as “an extra”.

Let’s take a regular neighborhood where the only buyers are those who are buying homes, and not builders who want the lot.  How can you tell?  Every house on the street is the same age, is a good clue.  No builder has ever bought a house torn it down and put a new home on that street, usually means no builder wants to do that. If a house burned down, well then of course the lot would have a value.  But if no one is interested in tearing the house down and putting a different house on it, then you don’t value the property by valuing the land first and then the structure. Most homes on the Eastside (housing developments) fall into that category, and any street in Seattle or Kirkland or Bellevue, considered to be a bad investment for new construction, falls into that category as well.

When no one would build a new house on the lot, you value a property based on comps alone, and the value of the land becomes irrelevant.  Most times the homes are on lots of about the same size.  A bigger lot vs. a smaller lot becomes “an extra”.  Sometimes extras add value and sometimes they don’t.  Too large of a lot often is viewed by potential buyers as “too much maintenance” and can actually detract from the value.  Often corner lots fall into the “more maintenance” category.  In these neighborhoods the large lot only values out IF it is SUBDIVIDABLE.  If the person buying it can turn the lot into two lots and put another house on that second lot and sell it, then yes, the extra land would be a factor in determining the asking price or offer price.

Before we leave this category of “no” you don’t separate the land when determining an asking or offer price, let’s talk about land as “an extra”.  The best rule of thumb for “extras” is they can’t in total equal more than 10% of the value of the property without the extras.  Say you have a house that comps out at $650,000.  You can’t get more than $65,000 more for that house because of extras, or $715,000.  Beyond that it just has too many extras.  Extras include, tennis courts, pools, extra land beyond the norm for the neighborhood, and to some extent new kitchens, new baths and any “added value” unless many in the neighborhood homes have also added these things and the comps have grown as a result.  If no one in the neighborhood has done ANY improvements since 1968, you can’t get double the price of everyone else’s house because you remodeled your house and have a pool and a bigger lot, etc.  That ONLY applies in areas where land is not separated from the structure in order to do a valuation.

So for all of the above, simple methods of price per square foot and adding and subtracting for some things here and there is the only method that works.

Let’s move on to where Larry is correct.

Larry, when the land does matter…then often it is ALL that matters, and the structure does not.

When it’s not all about square footage or value of structure, it often shifts to all about the land.

Example:  I had a buyer client who bought a 4-plex at 7th and Market in Ballard.  When he sold it two and a half years later (a year ago) the value of the 4-plex was roughly $720,000.  I listed the property at $850,000 because IF the buyer wanted to tear down the 4-plex and build townhomes, the value of the land was worth more than the value of the 4-Plex with the land under it.  It sold for $855,000 and five townhomes are being built on it as we speak.  People called who wanted to buy a 4-plex and it didn’t “pencil out” and a lot of agents thought I was nuts 🙂

When the value of the land exceeds the value of the home plus land, then the structure is “free”. This is true where builders are building and only WHEN builders are building.  If builders stop building for five years because the market is soft, then the value will go down to whatever an owner occupant will pay for it, and whomever buys it can live in it and sell it when the builders come back out looking for lots to build on.  We are entering a market like that and to some extent have been in that market for 10 months or so in some areas and in some locations.

So to answer your question, the reason it is or is not done the way you suggest is not because the “calculation is too complex”, it’s because it’s unnecessary.  A buyer isn’t going to pay you 3X the value of the neighbor’s lot plus the value of your structure, because the lot is 2/3rds bigger, unless it is subdividable into THREE lots. If it can only be subdivided into two lots, then they may pay you the value of your house based on comps and price per square foot, plus a portion of the value of the extra lot, not triple, even though it is 3X bigger. And if it can only be one lot, they may not want it at all, because it is too much maintenance and that can reduce the value overall.

The highest value of a lot is usually where the value of the structure is about nil AND a new house built on that lot will sell.  If you live on a street with no newer houses, if no one has ever wanted to build a new house on your street, the houses could end up at no value if no one wants to buy it as is and no builder wants to build on the lot.  Then it becomes your home for life…or a perpetual rental property 🙂

A woman approached me this Sunday.  She asked me what her property was worth.  The house was tiny and worth about $300,000 with a huge yard.  The lot was worth $300,000 without the house.  When I told her the lot was worth $300,000 she started talking about the house.  No!  You can’t add the value of the house to the value of the land.  No one is paying $300,000 for a big yard. They will only pay $300,000 if they are going to tear the house down.  Someone may buy it and live in it, but they will get the house for free if they do.  Maybe you can get $350,000 for it.  A $50,000 house is dirt cheap and someone may pay an extra $50,000 over lot value and live in the house.  But you can’t value the house at price per square foot and add it to the value of the lot.

You can sell it to a builder for lot value, or you can try to find an owner occupant who is willing to pay a little more than the builder will pay for the lot.  Those are your options.

Larry, my guess is your land is treated as “an extra” and adds 10% to the value IF a buyer views it as an extra vs. a shortcoming.  Today most people don’t want to spend all of their free time mowing the yard.  And you can only get 10% more for ALL extras on a combined basis. So if your house is already worth 10% more than your neighbor’s homes because you added a new kitchen…then the extra land is not of value as your exceeded you cap for “extras”.

Have you heard about Zilpy? New site for tracking rents in cities across USA…

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A title rep sent me an email today that gave me a head’s up on a new site I’d not seen before called www.Zilpy.com. It looks a heck of a lot like Zillow but with data on rents instead of home values. I’ve been playing around with it a bit and while I can’t figure out exactly yet how they’re getting the data, I’m intrigued. Most likely I’ll make mention of it to some of our investors to get their feedback on it as well and see if they think it’s a worthwhile site.

Check out the function of “heat maps” for rent levels in Washington. More states and cities are covered so it’s not just a Seattle gig. I believe it’s come to life from Silicon Valley.

Zilpy.com

A class act… Screen for Success via Rental Housing Association

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I’ve been a big fan of Tamara Simon and her landlord focused classes for some time. She’s been kind enough over the years to provide slimmed down versions of them for my clients and other public classes I’ve sponsored over the past 5 years. So, today I’m giving her a plug for an upcoming class she is doing for RHA where she has been involved in the education committee for years. She’s a top educator in this field and a darn good business woman and property manager.

Anecdotally, in my own RE business I’ve seen an uptick in interest in rental housing purchases (MFH) as prices have softened in that market area (read dumb money leaving the market! :)) so if you’re one of the people looking to own rental property, and especially if you plan on self-managing, this is a class to attend.

Presented by Rental Housing Association of Puget Sound

Screen for Success
Wednesday, March 12, 2008

Speaker: Tamara Simon, owner of Koss Property Management and a licensed Real Estate Broker since 1983.

Location: RHA Conference Room
529 Warren Ave N
Seattle, WA

Time: 3:00pm – 6:00pm

Cost: $45 for members

Come learn practical useful information on how to screen and select the winners from the losers. This class is more than learning to read a credit report. It helps you from knowing how to effectively advertise and show your rental, to the final step of renting it to your new tenant!

Landlord 101 class offered February 26th by RHA

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An excellent class that is offered through the Rental Housing Association is coming up soon. Tamara Simon of Koss Property Management has a been a long time owner of her own business and well respected colleague in the real estate industry and a professional that we’ve referred many a client to for help with their rental property management needs:

Landlord 101
by: Tamara Simon, owner of Koss Property Management and a licensed Real Estate Broker since 1983
Wednesday, February 27, 2008
Location: RHA Conference Room, 529 Warren Ave N, Seattle, WA
Time 3:00pm – 6:00pm
Program Cost: Members – $45-SPACE IS LIMITED PLEASE REGISTER EARLY
Please RSVP before Wednesday, February 26, 2008

Being a landlord can be a scary experience. Come learn practical, useful information on how to manage your rental property. Knowledge is power, get the tools you need to become a more effective landlord. Simon’s “Ten Commandments of Property Management

Anything but stormy

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As Tim’s last update let everyone know that his team was having fun through the storm, I thought I’d let everyone know that things are anything BUT stormy near my home in Southern Cal…

[photopress:behind_jeffs_house.jpg,thumb,alignright]
I live right off Las Virgines Rd, which is about five or six miles away down the road from the church and castle that burned down yesterday. However, the good news is that my family is far enough away to be out of any danger, the same of which cannot be said for many bloggers in the southern California area whose homes are clearly threatened…

[photopress:malibu_castle.jpg,thumb,alignright]On a side-note, I invited Scotty Brown to work out of Move’s offices today because the internet was down at his home and work in Malibu… Normally, Scotty is quite the dynamic individual but he simply wasn’t his usual self today… But who could blame him considering his $17M listing went up in flames.

Buyer Beware – New Construction Sites

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[photopress:images_1_2_3_4_5.jpg,full,alignright] I wrote an article earlier today about a scammer. I can almost appreciate the creative talents of an obvious scammer like that. But when it comes to the real estate industry, I just want to puke.

I stopped into a new construction site yesterday to evaluate it for one of my clients. There are four people in the room. A guy sitting at the site plan talking to a young asian couple and a woman standing a bit on the side. I see the guy giving the “hard sell” about two and only two “available” lots. I’m standing back and looking at the site plan and I see about 50 available lots. Only two of them have “available” stickers and 6-9 have a sold sticker. So doesn’t that mean all the ones with NO sticker are “available”?

For some reason the young couple doesn’t “get” this, but I just keep my mouth shut and wait and watch. Can’t quite figure out who the woman in the room is yet. The guy tells the young couple something about how Tuesday or Wednesday is the deadline for them to get one of those two available lots. They thank him kindly and leave to think about which one they want, if they want one at all.

When they are out of earshot, I ascertain that the woman is an employee of the builder before I step up and say, “I’m here to help one of my client’s pick a lot. Where are those big electrical towers I saw when I drove up, but don’t see on the map here?” At this point point the woman gets obviously “annoyed”. I continue to ask questions about all of the good lots. The woman keeps trying to push me at the two “available” lots. I ignore her and continue to evaluate the better lots in the development.

As I’m leaving I ask about the other developments nearby. The guy knows nothing. The woman gives me the whole run down of the builders other projects.

Then they tell me that HE is the agent for the SELLER and SHE is the on-site agent for the BUYER. What a JOKE! She is obviously the closer of the two. She obviously works for the builder and knows more about the builder’s stuff than the guy posing as the “seller’s agent”. What a “Good Guy; Bad Guy” scam that is! Nauseating, isn’t it?

I have one final question. What is the commission to a Buyer’s Agent who isn’t “the builder’s hired closer/buyer’s agent”. He says “FULL COMMISSION”. I say, “What is FULL”. She says 3%. I say, what does the buyer get if they have no “Buyer’s Agent”. She says, they get ME. LOL What a hoot. I said so the buyer gets nothing if they have no agent? No price reduction? No upgrades? No something for the builder not having to pay an extra $21,000?? Nope. Nada. Not an option. I ask if the buyer had lost the opportunity to have an agent if they had “signed in” already. They said no. Great News!

So I leave, I go to my client to evaluate the property they will be selling. I tell them there’s an extra $21,000 on the table for us to include and negotiate, if they buy that new construction (which they had asked me about), or even if they buy a different property. My fee will be less if they buy the new construction, of course, because they were the ones who asked me to go there in the first place to check it out. Well, no. They just said they were thinking of buying in there before I even met them, and didn’t ask me to check it out.

So by poking my head into the New Construction site, even though they hadn’t asked me to, I found an extra $21,000 that would have been left on the table. Turned out they will not likely buy there, at least not before considering other options. My gut says if the builder is willing to pay 3% to an agent, even though the agent wasn’t with them when the buyer first went in to the new home sales office, there’s probably something wrong with the place.

Every not lot sold in a new construction site is available. Maybe not today. Maybe they WANT to sell two at a time because it squeezes the buyer more into making a quick decision. But if it Ain’t SOLD…I’ts AVAILABLE, regardless of the little stickers. No sticker equals available.

Buyer Agency Agreements

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[photopress:dog.jpg,full,alignright] Is there a difference between dogs and cats? When you take out a leash, a dog usually gets all happy because he knows he is going to go outside. When a cat sees a leash he usually has the opposite reaction (some exceptions, of course) and says, no way I am going to be LED anywhere!

So what do dogs and cats and leashes have to do with consumers signing contracts?

For many years, agents have insisted that the seller sign a contract for their services, and by and large sellers have been happy to do so. I have never had a seller say, “Can’t you just do what you do, without my needing to sign a contract?”.

A seller is more like a dog than a cat, and a contract is somewhat like a leash. Most dogs are more than happy to be on a leash, as long as the guy at the other end of the leash, keeps pace with WHAT THE DOG wants to do.

The reason it is not possible to represent a seller client without a contract, is because of the “3rd party” promise to pay. The seller via that contract and the seller’s broker, agree to pay the agents who show the property. Say I list a house at $500,000 and the “seller” offers 3% “in the mls” to the Buyer’s Agent. That’s $15,000. While it may appear on the outside that the seller is offering that money to the Buyer Agent in the MLS, he isn’t. The buyer agent is an unknown person and the buyer is an unknown person, at the time the property is entered into the mls. The seller is not putting anything in the mls, the seller’s agent is putting it in the mls and promising to pay the buyer’s agent. The agent would actually have to cough up that $15,000 from his own personal funds, if he didn’t have a contract signed by the seller at the time he put the “offering” in the mls. That’s a little too much to ask of anyone on a handshake, so a contract is required from the seller.

Back to sellers are dogs and buyers are cats. The seller has a known address to the “product”/the house. It is easy to get a list of “services and metres” specific to that house. Does it need some staging? Is it photo ready? Can we get 15 photos quickly after it is staged and edit and upload them…on and on. Specific defined things after viewing the product/house, based on that house’s strengths and weakneses. Pretty simple stuff to calculate from day one, for the most part.

Buyers on the other hand are cats. They do not know “the address” of the property at the outset. They sometimes do not know for certain whether they will be buying a brand new townhome (not as much work for the agent) or a single family home built in 1910 (lots more work for the agent). They sometimes don’t know if they are going to buy in Renton or in Juanita or in Greenwood. Sometimes they need to see some property before making some of these decisions.

So a buyer needs to roam freely a bit, without a leash, more like a cat, to gather the information needed to come to an informed decision regarding type of property, general location of property and ballpark price of property. A buyer may need to see property with an agent in Renton, a different agent in Juanita and a third agent in Greenwood, before having enough information to hire the right agent for their needs. Anyone who has been in this business for awhile, knows that they are sometimes a stepping stone, in a buyer’s journey to an informed choice.

The absolute worst thing that can happen in this country, IMNSHO, is for buyers to be required to sign a contract, just to SEE a house. First of all it is demeaning, and lacks the respect and understanding of the industry, and its differences. It’s trying to put a leash on a cat, and pretending the cat is a dog.

Should You Pay More For THIS House?

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[photopress:polly.jpg,thumb,alignright]When determining how to structure an offer on a property, one of the key considerations is, “How scarce a commodity is this home?” How scarce it is to you, depends on the parameters you have set, and why you like this particular home, which varies from person to person.

If the property is unique because it has the largest lot in the area, then the seller is correct in putting a premium on this feature of the home. But, if why you are buying it is NOT because it has a large lot, then maybe you should not be the one to pay the “justifiable premium”. A justifiable premium for the seller, is not necessarily a justifiable premium for the buyer.

Often the seller will dramatically highlight their “premium” feature, such as a large lot, when they should not. I remember showing a home, with the owner in the home, and they kept raving about how huge their lot was. I could tell that the buyer had totally tuned out and had no interest in the property, but we couldn’t leave because the owner was going on and on about the size of the lot. When we got outside the buyer said, “Not me! I’m not spending my life maintaining the biggest lot in town!” I asked if he would have been worried about that just by viewing the property, without the seller’s influence. He said no, but now that I have this picture in my head of spending all of my weekends mowing the grass and maintaining the landscaping, AND paying MORE for the house for the “privelege” of it sucking up all of my free time, I just can’t see myself in that home. Otherwise, I may have bought it, but let’s just get out of here.

So the seller may indeed “deserve” more money for his house than anyone else in town, because he has the largest lot. But that does not mean that every buyer should offer that premium, in fact some will discount it, for the very reason the seller is raising the price. The buyer may deduct for the extra maintenance of the larger lot, while at the same time the seller is adding a premium for the extra land.

The photo above is in reference to “our Polly” who had the best question in the month of August. Before responding to a counter offer from the seller she asked, “What is the likelihood that you could find us a similar home within the next 60 days?” I was knocked out by this fabulous question! If only two of those have sold in the last year, then the liklihood is slim to none. If 40 of them have sold in the last six months, then you can play hardball with the seller. Excellent question to ask while in the middle of negotiations.