Yesterday I received a phone call from a competitor in my Destin Florida real estate market. The agent had a short sale condo listed in the same building as I did, and questioned why my list price of $260,000 was $40,000 less than his unit. He asked, "Is that price approved by the bank?" I told him no, as most short sale lenders do not pre-approve prices. He then asked if I truly thought I could get it approved, as he was hesitant to "chase" my price and match or beat it with his listing. I thought about that, and the factors that go into short sale pricing.
When pricing any real estate listing, one must consider several standard factors. Briefly:
1. Competition: Similar properties for sale may be overpriced, since they have failed to sell
2. Pendings: Properties under contract indicate what price entices a buyer to purchase
3. Solds: What price buyers were actually willing to pay
4. Expireds: What price was rejected by the market place
The obvious strategy is to price a property to be the best value in the category. Further, once a property is listed for sale, prices should be adjusted upon the following circumstances:
1. It has been on the market for a reasonable period of time with no showings (buyers rejecting "price)
2. It has had many showings but no contract (buyers finding better value in price range)
With a short sale, there is the final factor- the "X Factor". The "X Factor" is the price the short sale lender comes up with after receiving a purchase and sale agreement. This is the price that can make or break a sale (although it can sometimes be challenged). The lender price is based on a Broker Price Opinion (BPO) or appraisal. This third-party opinion changes the game and actually may distort markets. The "X Factor" price opinion may come from an agent with one year experience who has signed up on a website to perform BPO's. The price opinion may come from one appraiser who does not adjust for inventory levels. In the example of my condo listing, I may have "crossed the imaginary line" of what a bank may approve. The question lingers, at what point do you disregard the "X Factor" guess, and adjust the price to entice a buyer.
In the case above, after 7 months of gentle price reductions from $329,000 to $260,000 - the unit finally had a showing this weekend, and is getting an offer today. There are 2085 condos for sale in Destin. Less than 2% of them sell per month and there is a 5-year inventory. There are 120 units for sale in the subject's complex, and the last one sold in December for $300,000. The offer price should be around $260,000- the list price. Let the "X Factor" games begin.
It's Wendy!
Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.
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Wendy Rulnick specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Crestview, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy Rulnick, Broker and Realtor, has been selling real estate for 20 years. She has won numerous awards, including the coveted ADDY for advertising design. Wendy is in the top ½ percent resale agents on the Emerald Coast, and was featured in Kiplinger Personal Finance Magazine as a short sale specialist.
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