Why is that House Priced Higher than This House?

This is one of the many questions that we were asked this week and it's a pretty common one among buyers:

Why is that house priced higher than this house?  This one is nicer and is in a better location.

We were out looking at townhomes in Tanyard Springs, a newer community in Glen Burnie, Maryland.  There are a variety of large townhomes for sale in that neighborhood with 2 car garages.  Most are built within a few years of each other and have very similar layouts.  Some of the differences between homes are the color of cabinets, color of granite, whether they have carpet or hardwoods on the main level, size of deck, and location within the neighborhood.  Some will back to trees, others will back to homes and be surrounded by other homes.  

We've sold several  homes in this neighborhood and this client was picking my brain on options, and pricing.  We looked at past pricing and during one visit where we saw 4 homes, he asked why one home was priced at $350,000 and another that he thought had a better location and had hardwood flooring rather than carpet (backing to the woods) was priced at $327,000.  I explained to him that the seller is the one who prices the home.  They will ask our opinion, but it is their house and we are the ones who market the home and look for a buyer.

In this neighborhood, the houses are not very old, built in the last 8 years or so and if you look at what the sellers paid for the larger model homes with 2 car garages, you'll see prices in the $320k range.  Lennar is still building new homes in this neighborhood, Creekside Village is building up the street, Tanyard Cove across the street, and there will be more townhomes built off Marley Neck Boulevard.  This is keeping pricing down in the area for existing homes.  

This style home caps out about $330k, so even if the seller that has theirs priced got an offer for $350k, it won't appraise that high because the appraiser is required to use recent sold "comps" to value it. If a seller paid $325k 4 years ago and didn't put down money (like a VA loan) they will be upside down because of closing costs and will have to bring money to the settlement table to pay off the bank.

There are several foreclosures currently in that neighborhood because the sellers couldn't afford to sell and gave up and moved out.  They would have been better off trying to do a short sale if they qualified, but that's a whole other topic!    One of our military clients was transferred to California and are planning on retiring there and we were able to get a good offer for their house but at $327k they still had to bring $12,000 to settlement.  

So I'm not faulting the sellers who want to get $350,000 for their home - they just want to break even.  Unfortunately though, the market data just doesn't support it and in a cookie-cutter neighborhood, that data is very clear.

What real estate related questions do you have?  Email us at webberteam@aol.com, text or call 410-320-0242 and ask and we'll answer in our next blog (but we'll keep your name confidential!).