For the second time this week I was asked by a buyer what that our real estate market is averaging for the percentage off of list price. That question still surprises me because the real estate market has had a few years of being spectacularly unique and difficult to calculate. How on earth would it be conventional as a whole and fit into a tidy little box?
There are thousands of websites that offer available listings, recent closed sales and the county records are public so the closed sales aren’t a secret. Buyers come to the market with an enormous amount of research under their belt but sometimes they just don’t know or understand how to apply it.
It’s just as easy for a buyer to look at a list of available properties and question the viability of a listing price as it is for a real estate agent. Take a neighborhood with a half dozen properties of equal size and design, maybe even with the same floor plan. In the same complex it is possible to find a spread of tens, even hundreds of thousand of dollars amongst the similar units available.
If it were possible to calculate a “percentage off list price” for real estate, would two nearly exact condominiums priced respectively at $200,000 and $375,000 both contract and close sale at the same percentage off of list price?
Just for giggles I checked the percentage off list price in a neighborhood I was showing buyers homes in to help put this into perspective. Choosing two current properties for sale; one at the high end and one at the low end yielded a percentage off of list price of 1 percent on one condominium and 74 percent on the other nearly identical unit when compared to the most recent closed sale. It’s a waste of time to even average that wild stretch of numbers and expect it to benefit a buyer.
What buyers should be more concerned about are the actual, recent closed sales prices and the amount of inventory currently on the market. Every neighborhood and every home is different. There isn’t a magic percentage off of list price but there are calculations that help buyers make educated offers with a realistic, value basis.
In a nut shell, the offer price should be based on closed sales weighed with supply and demand, not a percentage.
To make things even more interesting, in many of the entry level communities a good chunk of supply has now been absorbed. The inventory has been reduced from several years to mere months, which has increased the demand.
What is really difficult for some buyers to wrap their head around these days is that sometimes the winning offer isn’t the percentage off list price but the terms of the offer and sometimes even dollars over list price.
Properties priced appropriately and in great condition have been selling quickly. When the inventory is no longer there, the offer prices inch themselves closer to or even a little above list price.
When there is little supply and real life demands you get into a home right away the offer price is based on current values, buyer motivation and the supply of real estate not an actual percentage off list price.
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Chris Griffith is a real estate agent at Downing-Frye Realty Inc. in Bonita Springs. If you have a question about local real estate or Bonita Springs, e-mail her at chris@LifeInBonitaSprings.com.