The Upper End Bargain Business

September was a good month for me. I had closings on 3 properties that would be considered "upper end", in a market where many have sounded the death knell for that segment. While the 3 properties would be labeled in the "better" category — one at Chapin, one at Lew Beach, and the third a secluded lakefront house on 5 acres on a private lake — their prices weren't. In fact, all three sold at prices that would have been unthinkable a year or two ago.

So what motivated these 3 buyers to step up to the plate in an arguably shaky market? Super deal prices. All 3 properties had been on the market for more than two years, with the initial asking prices about double where they finally sold. They all moved through more than one broker, with periodic price reductions (but no sales). They eeked their way from high priced through "OK, but nothing to write home about" priced, and finally dropped inton "Let's Make a Deal" land — where they found buyers.

I'm not posting this to crow about selling 3 "better" houses this month, but rather because they so perfectly illustrate the point I've been making for months about the constellation of factors needed to make a deal in today's market.

Time on market appears to be a key factor, and not just for these houses. Of the 10 closed single family sales above $300,000 over the past 3 months in the Sullivan MLS, 7 were on the market for more than a year. The importance of "seller fatigue" to striking a good deal is so significant, that I sometimes wonder why bothing showing houses that haven't been on the market for a year.

All 3 houses also moved listing brokers at least once. Why could that be important? A lot of sellers initially think the reason their house isn't selling is because the listing agent isn't going their job. Rather than reduce their price substantially, they think the magic bullet is changing agents. After a couple of agent changes that don't result in a sale, sellers may be more open to listening to an agent's opinion about the price needed to move the property. A downline agent is better able to deliver a tough love message about price.

Lastly, there was a personal factor on the seller side for all 3 properties that motivated a sale now, rather than letting the properties sit on the market for another year hoping for a better price.

As primed as these 3 sellers were, every deal requires a buyer. And all 3 of these buyers were well suited to move on these properties. The buyers shared two common factors. First, they had enough experience looking to recognize a great deal when they saw it. In fact, two of the three were looking since last year and saw the houses they ended up buying when they were listed at significantly higher asking prices. Second, they weren't looking for perfection if the deal was right

The challenge for me is to continue sniffing out these bargain opportunities for my clients. There just aren't that many out there, with the constellation of factors that add up to a super deal. Right now I have about a half dozen super deal houses on my radar for second home buyers, and have shown them a few times over the past month. But the potential buyers for those houses were new to the market and not yet seasoned, so they're holding out for something more perfect.

One last thought about these sales. I often hear from other agents that these sales are somehow 'distress' sales and therefore don't define the market. I beg to differ. While there may be "super motivating" factors among sellers, the fact remains that these houses didn't sell at higher prices.

(Note: If you're reading this today and thinking "Wow, I thought I read this yesterday but it was different," you're right. I rewrote it today because I didn't like what I wrote yesterday.)

Comments

[Reg]

Hi Dave,

Interesting as always. I do however take issue with any categorization of more expensive properties as "better." That's not necessarily the case, and there are lots of people--especially ones who are the very sort to want to find a place out in the country--who would never conflate the ideas of superiority and high price.

Larger properties often have a bigger carbon footprint (and bigger per capita carbon footprint) than smaller ones, and that's not good for anyone except for the person who owns the place. And let's be honest here, we're all seeing abandoned, unsustainable megamansions all over the country. That's real estate inventory that nobody but a seller would call "better."

[David Knudsen]

I used "better" more as an attempt to keep from using the same 'upper end' phrase over and over and over.

You actually raise a very interesting point, though, and one that is vexing for many green builders, and buyers who want to have a finely crafted home with a smaller footprint. The whole real estate financing and appraisal business has a size bias. The bigger the house, the more bedrooms and more acreage, the higher it will appraise for, and therefore can sell for with mortgage financing. The system, as it's now configured, has little way to incorporate small and green, apart from some nominal attempts by a handful of lenders to give a little extra for a house with green features because it will reduce ongoing carrying costs. It's a huge obstacle for the green home and small home movements.

[rk]

Since these properties have closed, and the sales price will be public record, are you able to disclose the original asking price along with the final selling price?

[Home Builder Joe]

House shopping is fun but doing it in person is tiring; it’s so nice to eliminate some and find a few gems online, then go see.