Did You Get A Good Deal Or Lower The Value Of The Home You Bought?

By
Real Estate Agent with Integrity Real Estate Group

You are excited.  You're telling all your friends about the great deal you got on your new home.  You bagged the home at $25,000 less than the last neighborhood sale.  You're doing the dance of joy.  But should you be?

Granted everyone loves to get a deal but your deal may not be as great as you think.  You didn't really gain $25,000 in instant equity.  Why?  Because the value of all of the future sales in the neighborhood has been lowered.  Appraisers are going to use the sales price of the home you purchased as a comparable for the next sale in the neighborhood.  The value of the next sale will be reduced by some amount.  It might not be the full $25,000 but with the way appraisals work in today's market it could be $10,000 or more.

Your great deal has just started a domino effect that touches every other home in the neighborhood. 

It's a Catch-22 and something you should remember.  Below market today is a new comp tomorrow.  Bye Bye instant equity, hello real estate reality.

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                                   Real People*Real Lives*Real Estate

If you are interested in learning more about the Northern Virginia Real Estate market including Alexandria, Arlington, Fairfax and Prince William Counties give Cindy Jones and Integrity Real Estate Group a call at 703-346-2213.

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Integrity Real Estate Group
 
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Rainmaker
749,948
Jackie Connelly-Fornuff
Douglas Elliman Real Estate in Babylon NY - Babylon, NY
"Moving at The Speed of YOU!"

Hi Cindy, you summed it up perfectly. Some markets are in a downward motion and may continue to go down. When you buy a home in that market, it may continue to go down but no one really knows how much. In my area, things are stabilizing but some homes are still selling for less than they should. There are sellers that just want to get out and they set the precedence for the next home that sells that is comparable.

Mar 10, 2012 11:22 AM #1
Rainmaker
3,246,891
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Cindy

Your post is right on target. the lowest priced comps are being used for the appraisals.

Good Luck and success.

Lou Ludwig

Mar 10, 2012 11:35 AM #2
Rainmaker
1,204,456
Tony & Darcy Cannon
Aubrey and Associates Realty - Layton, UT
The C Team

Cindy, Very well put!  That is the issue exactly, everyone wants to lowball every offer and suddenly they wonder why prices continue to drop!  Good stuff!

Mar 10, 2012 04:09 PM #3
Rainmaker
177,562
Erv Fleishman
Realty Associates - Boca Raton, FL
Luxury Prop Specialist Realty Associates

Everyone likes to feel that they got the best deal. Ultimately, they are going to live in the home and hopefully that is the best deal. How it affects the comps will be the last thing on their minds. Statistically, they will not be moving for another seven years and the comps today mean nothing seven years from now. 

Mar 10, 2012 08:41 PM #4
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Jackie-that's what is so strange.  Our market has stablized so when a seller, especially a regular sale, takes a substantially lower price it brings the value down for the next round of sales in the neighborhood.  Buyer's don't always realize what their "good deal" just did.

Mar 10, 2012 09:29 PM #5
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Lou-the low comps do get used and as a result bring down the values for the next sales.  Reducing the value of the "good deal" the buyer thought they got.

Mar 10, 2012 09:30 PM #6
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Tony-when a lowball offer closes the trouble for the rest of the neighorhood starts. 

Mar 10, 2012 09:31 PM #7
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Erv-yes you are right it is the last thing on their minds.  However it should be something they know.  Prices are stable in many of our areas and are back around the 2003 price point.  However when a house sells for significantly less than the comps it brings all of the values down again.  I think it is going to take longer than 7 years for that 25K in "instant equity" to return.

Mar 10, 2012 09:34 PM #8
Rainer
278,100
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

True,  but if you are going to live in your home for at least 7-10 years, it will all wash out.  It is a place to live, make memories and raise your kids.

Mar 10, 2012 10:46 PM #9
Rainer
241,877
Justin Dibbs
Pearson Smith Realty - Ashburn, VA
REALTOR® - Ashburn Virginia Homes for Sale

You said it perfectly!  In most cases they don't care, they are just sooooo happy about the $25k.

Mar 11, 2012 12:02 AM #10
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

So very important to remember.  There is no such thing as instant equity when you take that fact into account.  Your sale becomes the next comp.

Mar 11, 2012 03:37 AM #11
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Kathryn-perhaps but with a flat market if you bring down the value of the homes around you it could take longer for that discount to come back to a positive number.

Mar 11, 2012 07:58 AM #12
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Justin-they may not be the most popular people at the neighborhood BBQ :-)

Mar 11, 2012 07:59 AM #13
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Chris Ann-it does and we would rather see equal to or greater for a market recovery.

Mar 11, 2012 07:59 AM #14
Rainmaker
892,620
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
Realtor®, Springfield Mo Real Estate

This might be good for short sales, but it does hurt the neighborhood values.

Mar 11, 2012 01:10 PM #15
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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Kay-it does hurt values and the person who got the "great deal" usually figures it out to late.

Mar 12, 2012 11:34 AM #16
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