Friday, April 8, 2011
How are Sellers Doing in Today’s Market? or Nicholas Cage, you’re not alone!
“Gray Craig,” the estate that actor Nicholas Cage had purchased in Middletown, just sold for $6.2 million. That may sound like a lot, but it is actually $9.7 million -- or 61% off -- the original asking price of $15.9 million.
This “bargain sale” caused me to wonder how sellers in general are faring in this market, and how actual selling prices are comparing to Sellers’ expectations when they first put their properties on the market.?”
In order to try to answer this question, I created several charts based on the last six months of sales data in Newport County. The first chart compares actual selling pricess to original asking prices. The second chart compares original asking prices to the time it took to sell the property, or what we agents and brokers call “days on market.” The third chart shows the selling price plotted against the property’s assessed value (according to the tax assessor) and how that relates to price.
Here are the charts:
Selling Price (SP) over the Original Asking Price (OAP) against Selling Price (SP):
Properties above the red line are the only ones that sold for more than their OAP. Clearly, Seller expectations have been highly overblown for the most part, but we do have a number of instances where properties have sold over the asking price – some up to 20% more. Once you get over a million dollars, those properties have been selling for significantly less than asking price. On the whole, you can see that most buyers are picking up bargains – some at 60% off their OAP!
A number of Sellers reject the first offer that comes in with the notion that if they wait, higher offers will come in as more people see the property. They believe “good things come to those that wait.” Here’s a graph that shows how these types of Sellers do:
Again, properties above the line sold for more than their OAP. As you can see, most of the properties that sold near or above their OAPs sold within the first few months of being listed! On the whole, the longer the Seller held out and waited to drop their price, the greater the SP dropped as a percentage of their OAP.
The lesson here? Price it to sell right away and take an early offer; you’ll be glad you did. The adage of “good things come to those who wait” applies to the buyers in this case.
Lastly, I wanted to see how our local assessors fared in this market. Did they assess higher or lower than the market? Typically in a declining market, the assessed values are higher than the actual selling prices:
In this chart, SPs are plotted against assessed value (AV). Properties above the red line are thse that sold for above their AV’s. These properties also reflect where there is the most market demand.
As we expected, the majority of properties are selling below their AV’s. That said, there are still a good number of properties selling at or above their AV’s – a couple have gone for over two times their assessed values! For the most part, these are also the higher priced properties.
Note: the scale for the property price is a logarithmic scale, which allows us to see all the properties that sold in our price-diverse county, from $10k to $10M. According to the scale, it looks as if the properties that did the best against their assessed values are those selling for around $500k and above. These properties might be more improved, have more buyer appeal, or are in better condition than their brethren or, perhaps, the buyers are more well-heeled and able to pay what they want instead of being limited by what the banks will loan them.
I take a number of lessons from these charts. If you are selling your property, price it right to begin with so you can get the best return and perhaps even receive offers for more than your asking price. If you’re waiting for that special buyer who will give you your ideal price, stop. Drop your price until it sells.
If you’re a buyer in this market, take heart. It is most definitely a strong buyer’s market, with some properties selling for up to 60% off if they have been on the market for a long time.
But be warned that this scenario won’t last! At some point, the charts will reverse, and sellers will be back in the driver’s seat.