2008 Aug 25th

The 3 Worst Things About Overpriced Hoboken Condos

Overpricing Hoboken Real Estate For Sale Hurts the Seller, Hurts the Buyer and Hurts the Agent

Over the next few days I’ll address the various problems that can arise by overpricing a condo or house that you intend to sell.  Today’s post is addressed to sellers.

Many sellers think their property is worth more than it actually is.  To them, it is not only ‘home-sweet-home’ filled with fond memories of happy times but is often their single largest asset and may have been their biggest investment ever.  They want a return on their money and hope buyers will see the property through their own rosy lens.  Unfortunately, selling real estate does not always work out that way.

Hoboken is Unique, Especially When it Comes to Real Estate

Sales prices in the Hoboken condo market have been almost flat since about 2005, which is quite positive compared to the rest of the US.  Another unique feature of the Hoboken real estate market is that the average owner owns his or her property for less time than in other places.  Hoboken buyers buy, live in a unit for a few years until they move to the ‘burbs or stay in Hoboken but need more space.  So instead of holding onto their real estate for 7 to 10 years, they want to sell after 3 or 4.  I’ve encountered many Hoboken condo owners who bought condos in Hoboken in 2004 and 2005.  Now, 3 or 4 years later, after a job change, marriage, baby or what ever the circumstance may be, they want to sell that condo.  Often, they not only want to cover the commission of a realtor but also want to make a profit.  Making money on a real estate investment is certainly a reasonable goal.  One has to look at the economic environment at the time one wishes to sell.  If prices are dropping all over the country and they’ve been flat in Hoboken for the past few years, it’s no longer reasonable to think that if you bought a Hoboken condo in 2004 you are going to be able to sell it for a profit in 2008.  If you are very lucky, you might break even.

Bad Real Estate Math

Nonetheless, Hoboken condo owners will say well, I paid $610,000 and with a 5% commission I need to charge $650,000 to clear $610,000 plus I would like to see at least a $10,000 gain so let’s ask for $660,000.  Never mind that the comps show similar Hoboken condos actually selling for $580,000.  Of course, there are agents who will list the condo at any price just to “get the listing”.

Overpriced Condos Are Like Day-Old Donuts

What happens to overpriced properties?  They don’t sell.  Often, they don’t even get seen by potential buyers.  There is enough inventory of similar condos on the market at any given time that, in a sense, Hoboken condos become fungible.  A buyer looking for a 1000 to 1200 square foot 2 bedroom condo around 9th Street will have multiple units from which to choose.  When the vast majority of these condos are priced in the high $500,000’s there is little reason for a buyer to want to see the one priced at $660,000.  They don’t need to.  How much better could it possibly be to warrant an extra $50,000 to $100,000?  There are many condos for sale in Hoboken that represent a good value.  Those are the ones the buyers want to see.

Showings Lead To Offers Which Lead to Sales

No appointments – the listing agent has the meeting with the seller that goes something like this:  “Well, Mr. Seller, we’ve done everything possible to market your property.   We’ve got it featured on every conceivable web site, have held 37 open houses, ran ads, took photos, distributed flyers, and then some, yet we’ve had very few appointments other than the nosy neighbors coming to the open houses.  It’s time to consider adjusting the price.”  At this point, however, the unit has been listed on the MLS for maybe 3 months (or more).  It’s become stale.  The novelty is gone and the excitement among the agent community doesn’t exist.  Agents don’t want to waste their time showing overpriced lisings!  So the price gets dropped but seldom significantly enough to make a difference.

Relisting Your Hoboken Condo For Sale Usually Means an Even Lower Sale Price

The more typical scenario is that eventually the listing expires.  Sometimes the owner will find a tenant and wait a while to sell.  Having a tenant in a property you later intend to sell raises a whole other set of concerns, the subject of a follow-up post to this one.  Sometimes, the property is relisted after the owner has moved out.  Now that beautiful Hoboken condo is vacant rather than nicely furnished.  All the scuffs on the walls show, the place echos, the refrigerator smells and the dust starts to accumulate.  Not very appealing.  The price comes down again.

Get Ready For A Fire Sale

Eventually, when the price gets low enough, someone will buy the property.  At this point, it is a deal.  The condo is often sold for significantly less than it could have been, and likely would have been, if it were priced correctly from the start.  When your condo for sale is the best option for the money, the phone is going to ring off the hook.  Not only will you typically have many appointments, you will often end up with multiple offers.  Multiple offers mean you get to choose the best, highest and strongest among them; a good situation for a seller to be in today.

See Also:  The Donut Story

Next – How overpriced listings hurt the buyer

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