You hear that a home is worth whatever a buyer will pay, the ultimate arbiter of value.
But when someone pays about 35% more than anyone else for a comparable home, is it market value, or just a case of someone grossly overpaying because they didn't know differently? No agents were used in the transaction, so we'd venture the buyer had NO knowledge of comparables when they agreed to the sales price.
BACKSTORY: We interviewed for a patio home listing a couple of years ago with a nice elderly couple. They'd been trying to sell FSBO (For Sale By Owner) after previously using an agent and were considering making a hire and going back to agent representation.
They had a very nice home, but between new construction still going up, and neighboring homes selling in the mid-$200ks at best, there was no way to get a price in the high $300ks like they were asking as a FSBO. We showed them the data, how we market a home, all the usual and it went well, with the exception of pricing. We weren't taking a listing $100k above everything else!
There was just no way we could rationalize marketing for what they wanted, and knew if we did get an offer, there's no way a bank would approve a loan anywhere near list price!
We agreed to keep updating them on market conditions, and when it looked like the market would support their price range, we'd list and sell their home. In the interim, they were going to continue to FSBO. We upheld our end and continued to provide periodic updates, and there was still no evidence of the development handling anything over $300k, but at least the new construction finally finished this year!
BACK TO CURRENT DAY: Last night, we get an email from the couple letting us know they sold their home and already bought a condo! Our first thought is, did they decide to drop their price, because otherwise no way they could have logically sold! Fortunately the sale was recorded in the local auditor's records.
$361,500!!! HOLY COW!!! YOU'VE GOT TO BE KIDDING ME!!!!
The sale wasn't recorded in MLS, so no evidence of any agent involvement. MLS showed $265k for the most recent comparable sale, and nothing had sold any higher than that in the last two years!
The homes in the neighboring development are going for $400-500k, but they're regular single family homes rather than patio homes!
Turns out the buyer (73 years old according to a quick Internet search) only financed in the low $200k range and paid cash for the remainder.
The only logical explanation we can come up with, FSBO seller to unrepresented buyer, buyer thinks he's getting a great deal based on what the seller is telling him, and since the bank is only financing a portion well UNDER market value, they don't care either (nor should they).
Bottom line: Looks like Mr. Buyer overpaid by at least $90k. And perhaps to him, the home was WORTH that, but if the home had been fully financed, absolutely NO WAY a bank would have gotten anywhere near the $361,500 price. Anything past the high $200ks would have failed to meet appraisal for sure.
If YOU don't want to overpay, give us a call! The commission "SAVED" by this buyer was PAID many times over!!
Taking care of our clients every day,
Liz and Bill aka BLiz
Serving Warren County Ohio & Adjacent Areas
The Liz Spear Team of RE/MAX Elite
Elizabeth Spear, ABR, CRS Ohio License SAL.2002007747
William (Bill) Spear, CRS Ohio License SAL.2004011109 Kentucky 77938
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Bill Direct: 513-520-5305
Liz Direct: 513-265-3004
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