Bonita Springs – Estero Real Estate Buyers: What You Need to Know about Price

By D. Michael Burke, Bonita Springs – Estero Florida Luxury real estate expert; as printed in the News Press May 15, 2010

There are a lot of misunderstandings among buyers when it comes to price. Commonly held notions, such as that you’ll get the best deal if you buy a foreclosure or a short sale, tend to disguise the truth and lead buyers astray.

My point is, just because an opinion is commonly held doesn’t make it right. As a luxury real estate expert, I look at price, statistics, and hard evidence every day, and I can tell you that what you think is true is often actually false. Here are a few examples of how popular wisdom differs from the truth.

Foreclosures and short sales can cost you more in headaches. One of the prevailing notions in the real estate market right now is that you get the best deals by buying foreclosures and short sales. While these types of sales do offer some really good deals, don’t forget that there is a reason why they are so cheap. Often the property has extensive damage that will need to be repaired before the house is livable, let alone ready to be resold. Furthermore, if you are buying a short sale, you may have to wait months before you get an answer from the lender as to whether they are willing to accept less than what’s owed on the home, and even then the answer may be no.

Do you have the time, patience, and experience to wait for the lender’s answer, risk them refusing a short sale, and then still have to fix up the place even if you are able to close on it? It is important to seriously consider this question before trying to buy a short sale or a foreclosure. Talk to friends who have bought these types of homes and ask about what hurdles they faced before and after closing. Consult with a real estate agent too – if you decide to go this route, you will need an agent who is experienced in these types of sales, anyway.

If you decide that no, the headaches of a foreclosure or a short sale aren’t worth the savings to you, rest assured that the savings aren’t huge. You aren’t going to get a $300,000 home for $150,000, for instance. You might end up paying 15 or 20 percent under what the home is worth, but then again, your savings might be considerably less – or you might spend the difference fixing up the home. In comparison, with prices as competitive as they are right now, it is more than likely that you will find a great home that is move-in ready for only a little more than you would pay for a foreclosure or short sale.

FSBO doesn’t save money, it costs money. Again, common wisdom tells you that you will save money by buying a house that is For Sale By Owner, since the owner doesn’t have to pay an agent’s commission out of the money from the house. There are holes in this line of reasoning, however. First of all, why do you think the seller is going to pass the savings on to you? It may sound heartless, but I believe most homeowners that opt for FSBO do it because they don’t want to pay an agent, not because they want to list their house at a lower price.

Of course, it backfires on them because most FSBO homes end up being listed by a real estate agent anyway – they just don’t sell otherwise. The reason for this is because the seller does not have the knowledge or experience to price their home competitively, let alone market it, and as a result it just never sells. Most people have a hard time setting a fair price for their home – it is difficult to be impartial about your own home, and as a result most FSBO sellers think their home is worth more than it is, simply because it’s theirs. For the same reason, FSBO sellers are often unwilling to negotiate, so you may actually find yourself paying more than market value if you buy directly from the seller.

Sometimes list price can be a really good deal. When it comes down to it, you really don’t know whether you should make a lower offer unless you and your agent have done a comparative market analysis (CMA) to see what houses are selling for in the neighborhood. While many sellers err on the side of listing too high, assuming that you should always make a lower offer could actually lose you the property if it’s already competitively priced: The lower the price, the greater the interest, and the more competition your offer will face. Too low an offer, and the seller will choose another buyer’s offer instead of yours.

When I list a home, I do a CMA to identify pricing trends in the neighborhood. A comparative market analysis looks at the final sale price of closed homes as far as six months back, so in addition to showing the price per square foot in comparable homes, the CMA also tells me whether prices in that specific neighborhood are going up, down, or staying relatively the same. Many other sellers’ agents have the same approach, as – like me – they have found that competitive prices result in faster sales and happier sellers.

So don’t automatically assume that you need to make a lowball offer in order to get a good deal. If the seller’s agent has done their job, you won’t have to, because the price will already be competitive. That’s why it’s important to make sure your agent has done their job, too: Viewing a home without knowing what other homes in the neighborhood have been selling for is like driving down the road with a blindfold on.

Although popular opinion can lead you astray regarding price, it does tell us one thing: Pricing is important. Buyers like you care about getting good deals. That is why it is important to have a real estate agent you can trust to give you good advice when shopping for a home. To discuss pricing in your area, whether as a buyer or a seller, please feel free to contact me at any time. Competitive pricing is my specialty, and I have the tools at my disposal to ensure that your home – or your offer – is priced right!

Contributed by D. Michael Burke, P.A. Keller Williams Elite Realty
Michael@CoconutPointRealEstate.com / www.CoconutPointRealEstate.com

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