Pricing for sale when there are no comps?

Question

We've always had nice slow and steady residential market here but this year it has gotten quite quite batty.

I am selling a house in a hot neighborhood and am puzzled about what price to ask as I don't have any MLS comps. This is because all the sales this year in this neighborhood are being done privately before the houses even hit the market.

How should I price this thing? Just start very high and come down incrementally until someone bites or start low and pick the highest multiple offer, or do a professional onsite auction?

Robert Steele · Answer

No transfer tax.

Well I got it under contract without even putting it on the market. The buyer gave me an offer that was too good to refuse.

I have only a vague idea of what the property would sell for in this market but given I was able to stop my rehab and not spend any more out of pocket and not have to deal with any future unknowns it seemed like a good deal.

I countered back with a small price increase and better terms. If the buyer got the better deal so be it. I am happy with what I am walking away with even if I did leave money on the table.

The buyers agent has been working these private sales so knows what they go for. I only hope that they made the offer competative enough not to lose it. The buyer was very keen.

This was all a very weird situation for me. I've never had a buyer make a cash offer while I'm in the middle of a rehab for house in neighborhood I can't effectively comp.

Wayne Brooks · Answer

Steve E. and Robert Steele  why do you think $12k EM is out of line, if you're offering cash?
Generally you're not even placing EM unless your offer is accepted.  Double the EM stands to a seller.  I generally offer 20-30% EM on my own cash offers, no inspection contingency.  I already know if there are any code violations/building permit/lien issues.

Wayne Brooks · Answer

Robert, is there any kind of transfer tax, at a % rate for sales there?  Our document stamps fee is stamped on the recorded deed.  From the taxes you can determine price, but you probably would have noticed that.

Wayne Brooks · Answer

Get your comp.s from the county records, not just MLS.

Robert Steele · Answer

I didn't know it was a cash offer. Maybe I am adjusting to the new normal but in my neck of the woods $1K EM has always worked in the past.

Simon Campbell · Answer

Robert Steele is right on here. Rather than being a bubble, it is an under supply and an over demand. Non-distressed homeowners have been sitting on their homes, even though they had a desire to sell, to wait for market recovery.  The lack of supply combined with dirt cheap interest rates and lots of discounted foreclosures and short sales brought in an over supply of buyers.

This should even itself out now that prices are on the rise which encourages more owners to list their homes.

Robert Steele · Answer

Steve E. No I do not think it is a bubble. Simple supply and demand. There is only something like 2.8 months supply on market where 6 months is considered balanced. I don't expect it to last forever. The Dallas housing market is very elastic. The builders will play catch up and things will return to a more sedate 4% annual appreciation. Local economist Mark Dotzour thinks it might continue like this until mid 2014.

Steve E. · Answer

Robert, thanks for the feedback and do you think it is a bubble or starting of a seller's market.  And probably most of the offers submitted for this property and similar properties are investors.  The price they are paying would fetch hardly anywhere between .7-.8% rent and I don't get it.

Robert Steele · Answer

Thanks Steve E. Wow. If my Realtor treated me that way I dump him or her. Granted, a bigger escrow shows you are serious but I agree $12K does sound like too much.

My Realtor has been telling me similar stories about taking a buyer to look at a property the day it comes on the market and then by the time they submit the offer it is already gone. This is very unusual for this area.

What is the saying she has; something like she will get you the right property at the right price but you must have patience. I know she just closed on a duplex for the sister of a work colleague. It took 4 months of looking and making offers but they got what they wanted to for the right price in the end!

Steve E. · Answer

Congratulations Robert.  I am  in your neighborhood and have read your past interesting posts.  I hope you probably noticed the market particularly in Frisco, McKinney and Plano.  I had been trying to get my first rental property and lately all my list price offers or little better had been shot down.  This property, 9924 Nixon Drive in Frisco, was listed last Friday, we viewed the property at noon on Friday.  I was waiting for my realtor by the way not really happy with him, keeps bragging how he wins i multiple offer situations.  This keeps me worrying because the only reason could be you are offering way overpriced.  Anyway this house was listed for $149K, last year around this time the same type of house was around $135K.  The realtor convinced me to offer $11K more and escrow of $12K which I never heard of.  I thought that was too much and made him submit with $5K escrow.  He was not happy about that and made comments how I am not ready to be a RE investor, blah blah blah.

Anyway coming back to the offer, we just found out they have selected a better offer and will keep ours a backup offer.

This shows how the market is and probably all the realtors are just having a ball with all these newbies including myself.

Pricing for sale when there are no comps?

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