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A look at pricing errors in lower-priced Cape condos

June 15, 2018
By BOB and GERI QUINN - Homing In , Cape Coral Daily Breeze

Today we thought we would take a closer look at the lower-end of the price range in the Cape Coral condo market, to provide some additional insight and to further illustrate some of the issues we continue to see with the number overpriced homes and condos listed for sale. The information below is for the year-to-date 2018 numbers, through June 3, for the 10 lowest priced condo sales in the Cape, followed a look at a marketing postcard we received in the mail recently.

The bottom 10 in closed condo sales had a price range from a low of $55,000 to a high of $75,500 and none of these involved any foreclosures or short sales. To give you an idea of what a buyer will get for their money, these condos were built anywhere between 1964 and 1984, and eight out of these 10 had less than 1,000 square feet of living area. So, you are generally looking at older, smaller condos in this price range. Most of them will need at least some level of updating and remodeling work, if not a total interior rehab, and nine of these units were bought with cash, while one unit was purchased using seller financing.

Three of these lower priced condos would have been considered as "reasonably priced" when they were first put on the market, as their final sales prices fell within a range of 5 percent to 8.13 percent of their initial list prices. This type of percentage range, in relationship to the initial listing price, is usually close enough to attract a buyer without requiring a price reduction, and if a seller has it priced right, it is almost always confirmed by solid showing activity within the first several weeks the home or condo is put on the market.

One of the other condos in this list of the 10 lowest-priced sold had an initial list price that was actually under priced. When this happens in our current market, the property will typically be swarmed by potential buyers and offers at full price or above will come in almost immediately from multiple buyers. This sometimes results in the seller sending out a notification that they are setting a deadline for accepting the highest and best offer from multiple buyers. In these situations, the seller is not required to accept the highest priced offer, but they can also consider the terms of the offers to determine what combination of price and terms suits their situation the best. In this case, they went with this highest and best offer approach, and the unit was under contract with a cash buyer after only four-days on the market. The final sales price was 7.69 percent above the initial list price. It is actually almost impossible to under price a home or condo in our current market, because it will attract so many buyers that the price will most likely be competitively bid higher.

It was a completely different story for the other six condos in the bottom 10 by prices sold. These six all started out overpriced by more than 10 percent and had to make price reductions to reach their optimal list prices before attracting an offer from a buyer. So in this random sample of 10 condos, 60 percent were in an overpriced range, as their final sales prices were between 12.84 percent to as much as 37.45 percent below their initial list prices. In fact, five of these six sales were off by more than 15 percent from their initial listing price, including two that were off by more than 30 percent. These are not only some big misses, but these types of initial pricing errors happen much more frequently than people realize.

To give you another random example, we received a postcard in the mail from an agent who had a listing that had been sold recently and they seemed to be touting their ability to get the job done with a headline that read, "Your neighbors got exactly what they deserved! And it could happen to you next!" In the opening paragraph of this marketing piece, it also seemed to indicate that the listing agent "found" the buyer for their seller by stating "(the listing agent) found the right buyer at the right price for their home!" These marketing statements could seem to imply that this home was sold for top dollar, and that the listing agent "found," or "brought the buyer," to the deal.

However, when we pulled up information about this sale, we discovered it was first listed for sale at $309,000 and it then had three separate price reductions totaling 11 percent, or $34,000 over a two-month period, before attracting an offer from a buyer. The ultimate sales price was 15.86 percent, or $49,000 below the initial listing price, and it turns out the buyer was represented, or "brought" to the deal by an agent from another brokerage firm. There is a possibility that this sale still met the sellers' expectations, but somehow we're not so sure if it was quite as magical for the seller as the marketing piece seemed to indicate.

In fairness to the agent in the above situation, some sellers insist on listing their homes for higher prices than recommended by the listing agent, so some of the overpricing is not necessarily the fault of the listing agent. However, there are also a lot of real estate agents who are more than willing to tell a seller exactly what they want to hear when they go out on a listing appointment, as they try to beat out other agents at all costs for a coveted listing agreement. As someone looking to put their home up for sale, if a potential listing agent does not point out possible marketability issues that could have a negative influence on the sales price of your home, it may be an early warning sign the agent is quoting you an unrealistically high listing price. Being able to properly identify things that are likely to be issues that turn-off potential buyers, will help in setting a more accurate initial value on your home.

The upfront conversation with a potential listing agent should also include a fairly detailed strategy and timeline for making price reductions, if needed, based on market statistics and showing activity. A seller should never be surprised at the need to make price reductions or by the dollar amounts of those price reductions. If an agent avoids discussing these things in the listing appointment, there is a higher probability that your home will end up being overpriced, and homes that are overpriced in the current market do not get sold.

(The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County as of June 3, 2018. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral condominiums. It does not include single-family homes, unless specifically noted. The data and statistics are believed to be reliable, however, they could be updated and revised periodically, and are subject to change without notice. The Quinns are a husband and wife real estate team with the RE/MAX Realty Team office in Cape Coral. They have lived in Cape Coral for over 38 years. Geri has been a full-time Realtor since 2005, and Bob, who also holds a Certified Financial Planner designation, joined with Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.)



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