Will 'Right Pricing' Work to Sell a House

The hot real estate term right now is 'Right Pricing'. (No, its not 'foreclosure'.) There's been a new construction spec house at Chapin Estate on the market for well over a year, listed first with Chapin Realty and then 3 months ago moved over to Malek Properties. (Click here to see the house.) The asking price for the 4BR, 3 1/2BA, 3,319 sq. ft. house on a 5 acre non-lakefront parcel hovered just under $1 million --- between $964,500 and $997,500 --- and it just lagged. The house is well built, in a lovely Adirondack lodge style with a good floor plan. The house has been shown quite a bit, but nobody bought it. It just didn't hit the value proposition right for buyers. Yesterday, the owner dropped the price to $824,900. I sure sat up and noticed. The seller bit the bullet and made the 'right pricing' move, and I expect, even in this sluggish market, that the house will have a buyer within the new few weeks.

Then in today's Sunday New York Times, there was an article in the real estate section on "The Case for Right Pricing". The examples they used were in the NJ suburbs, but I think there is far wider application. I was curious about how the pace of price reductions here in Sullivan County. I looked at the 760 single family houses that have been on the market here longer than 90 days. Of those, 400, or 53%, have had a price reduction from their original listing price. But most of those price reductions have been very modest, less than 10%. Only 196, or 26% of the 760, have had a price reduction of 10% or more. I also wonder what those other 47% of sellers who've made no price reductions after 3 months with no sales action are thinking. They must be watching a cable channel I don't get.

I've blogged before about my experience selling my condo in Florida. It was on the market for 18 months, always priced just slightly below similar units. I was always priced better by a few thousand dollars, and my broker kept advising me that was the right positioning. But it wasn't the right price. My last asking price before I took the plunge was $339,000, and the next closest similar unit was listed at $345,000. I bit the bullet, lowered the price to $299,900, and had a full price deal within a day.

I can't say that will work for all properties here. But there are plenty of properties with enough appeal features that could benefit from some radical price surgery — and likely capture that coveted "SOLD" sign.

Comments

[Chuck]

DK - not to be a curmudgeon, wet blanket or kill joy, - but who estimated the taxes on the Chapin House to be $8500 per year? Maybe 3 or 4 times that amount would be more accurate. It constantly amazes me to see such inaccurate information being passed on to buyers - and reinforces my experience that at times selling agents set the expectations of their clients incorrectly.

As a builder and seller, I am constantly left to deal with inaccurate information long after the deal is done, where as the selling agent walks away with the commission and washes their hands of it, with a shrug of the shoulders and muttering 'I didn't know!'

At this point, any one professionally working in real estate in Sullivan County knows that an $800k house will not be taxed at $8k - in fact, the amazingly high taxes at Chapin has been one rationale used to explain the slow sales.

Similarly, lowering a price from $400k to $300k is a 25% reduction. $980k to $830k is a 15% reduction, hardly a drastic reduction, considering it's probably all profit over $600k.

Now, getting a Chapin off-water house for $600k-700k, - that's a deal.

Regardless, it reinforces my opinion that the market remains vibrant for the right properties, regardless of the constant headlines. That's what I am seeing anyway.

[Tony Ritter]

{Chuck writes:}
"...not to be a curmudgeon, wet blanket or kill joy, - but who estimated the taxes on the Chapin House to be $8500 per year? Maybe 3 or 4 times that amount would be more accurate."

===================

Try - $40,485.00 - for annual taxes for a waterfront home at Chapin to be exact.

$17,058 to the town of Bethel and $23,427 to the Monticello School District is the Y07 tab for one couple.

This is a full tax rate since.

I don't believe, they qualify for the NYS STAR program due to the fact that they're primary home is in The City.

If one was to go onto www.townsoft.com ----> Bethel (Town Taxes) or Monticello School District (School Taxes) ------> #55.E-1-XX (S-B-L)

the reader's will get some idea what an average tax bill is for properties on Sunset Point and Homestead Trail at Chapin Estate.

Sincerely,
Tony Ritter
Narrowsburg, NY
www.gonefishingguideservice.com

[David Knudsen]

You're right, Chuck, the taxes are WAY off on that listing. Its one of my major issues with listings in the MLS. Agents often take the seller's verbal information on taxes, without verifying. Or in the case of new construction, the most recent tax bills may have been based on the raw land value --- so the taxes in the listing are technically correct --- but there may have been an intervening reassessment based on the completion of the house that would have jacked them up substantially.

It only took me about 10 minutes to uncover what the current real taxes on this house are/will be. The 2007 property tax bill (due last January) was low, about $1,800, because it was based on a land assessment of $101,000 with no house. The property was reassessed in March based on the house, which upped the assessment to $437,000. The September school tax bill, as a result, was $11,108. Applying this year's property tax rate in Bethel (1.8%) to the $437,000 assessment results in a likely January 2008 property tax hill of about $7866, for a total of $18,974. Not 3 or 4 times what's estimated in the listing, but more than double.

Tony, those $40,000+ bills are for lakefront houses, and generally larger ones than this house. This one is non-lakefront.

I think its imperative that buyers ALWAYS confirm property taxes BEFORE making an offer on a house. Don't rely on what's put in the listing, because it is often incorrect.

[John M]

My understanding is that (at least in the town of fallsburg) that real estate taxes for a second home owner are actually half. I know a few people (one in Liberty) who pays less than half the original amount in taxes simply b/c they are a second homeowner in Sullivan.

[seymourpansick]

"Yesterday, the owner dropped the price to $824,900.
That house will have a buyer within the next few weeks."

You're on.

[David Knudsen]

John M, that's not true at all about second homeowners paying less in property taxes. Assessments are on the property, and a universal rate is applied in each township (and school district) to that assessment to come up with the property and school taxes. There are some modest exemptions available to primary homeowners on their school taxes, namely the STAR exemption and some veterans and senior exemptions that can reduce the assessed amount somewhat. But those are only for primary homeowners.

seymourpansick, I'm not the listing agent on that house. But I do think the price has moved into the range where it becomes very attractive to someone looking in Chapin. There are those taxes, though.

[Chuck]

seymourpansick - don't wager too much - DK has inside info.

[Chuck]

The dangerous part of buying a house with an assessment drastically lower than actual value or purchase price is that the assessor can, and sometimes will, reassess to purchase price.

At the moment, the only way to value the house at Chapin, at least in eyes of the assessor, is what the builder wrote for construction costs on the building permit application - which is usually way underestimated. When someone buys it, then the actual fair market value becomes evident.

For example - $820k x .04 = $32,800 - if the Chapin House is assessed at purchase price. In Bethel, Marge doesn't assess at Fair Market Value, but she usually comes a lot closer than the assessed value on the house presently, and I'm sure she will take another look.

And Tony - $40k for a lakefront house in Chapin is on low side.

The time is coming for a tax revolution in Sullivan County - of the people, by the people, for the people. It's time to stop the unsupervised, unchecked power of those working in that dank office of the assessor. Free supply of tar and feathers to all revolutionaries.

[Tony Ritter]

{chuck writes}
"...And Tony - $40k for a lakefront house in Chapin is on low side."
======================

$40,000.00 for annual taxes is on the *low* side for a waterfront house at Chapin Estate? Ouch.

Chuck, what then - would be considered - *normal*?

Current *oceanfront* large homes for sale via Douglas Elliman, Corcoran or Brown Harris - say 4BR/5BR with 2/3 Full Baths [3,500 to 4,500 square feet] in Quogue near the Hamptons are in the high teens - 15k to 20k - for annual taxes.

If this is true - Chapin Estate (as they've been advertising to us for the past two years) is certainly:

==========================
"...Beyond the Hamptons."
==========================

Sincerely,
Tony Ritter
Narrowsburg, NY
www.delawareriverfishing.com

http://www.vlshomes.com/agents/style05.cfm?in_listing=5326910&in_brokercode=VIAN01&in_agt_key=vian01dkessler

http://www.vlshomes.com/agents/style05.cfm?in_listing=5325715&in_brokercode=VIAN01&in_agt_key=vian01dkessler

http://www.vlshomes.com/agents/style05.cfm?in_listing=4527604&in_brokercode=VIAN01&in_agt_key=vian01dkessler

[John M]

Here you have it......

Manhattan prices falling!

http://reggiemiddleton.typepad.com/reggie_middletons_perpetu/2007/10/manhattan-real-.html#more

[Chuck]

Tony - do you mean 'normal' for chapin?

If so - just do the math -
Lot price - $800k + (4000sf x 240/sf building price) = $1,760,000 - say the assessor gives you a break and assesses you at $1,300,000 x .04 = $52,000.

I'd say normal was $45k - $70k - with more than a half dozen higher than that.

There are a few homes worth $5m+, so if the assessor assesses at $2.5m (or less than half of value)- then $2.5m x .04 = $100,000 per year in taxes.

Ouch is right. Ridiculously regressive. Just plain stupid. Incomprehensible. Embarrassing.

[Tyler Durden]

"Current *oceanfront* large homes for sale via Douglas Elliman, Corcoran or Brown Harris - say 4BR/5BR with 2/3 Full Baths [3,500 to 4,500 square feet] in Quogue near the Hamptons are in the high teens - 15k to 20k - for annual taxes."

Bad example - Quogue has some of the lowest taxes in the state.