2008 Sep 15th

Part II – The 3 Worst Things About Over Priced Listings – They Hurt the Seller, the Buyer and the Agent

Hoboken Condo Buyers

There are a lot of different types of buyers.  Some of them clearly haven’t made the commitment to buy.  These “buyers” could have the deal of the century fall into their lap and they still wouldn’t make a move.  Other buyers think they can outsmart the market.  They show up with spread sheets full of numbers showing break even points and comps.  They won’t buy anything unless thy find a property they love and it is being offered at ‘below market value’.  These buyers may spend too much time looking for that perfect deal and miss out on some beautiful, well-priced properties because none ever meet their magical criteria.  Then there is the rare buyer who wants only the most luxurious, most expensive properties – the $4 million penthouse at The Shipyard, the lofts at Garden Street Lofts, the brownstones on Hudson Street or Castle Point Terrace or the huge unit at Maxwell Place with 2 balconies and the dead-on city view.  It often seems that spending the most money possible is their main goal.  These are the extreme cases.  Most buyers are simply looking for a place they would like to call home at a price that they believe represents good value.

Buyers Can Figure Out What a Hoboken Condo is Worth

When buyers have shopped around a bit and have looked at a bunch of Hoboken condos, they start to get a pretty good sense of value.  Potential sellers might do just that when deciding how to price their property.  Go out and pretend you are buying a unit in the price range of the one you wish to sell.  Examining the competition is one of the best ways to gauge how your own property stacks up.  A savvy buyer will have looked at recent past sales to know what the unit across the hall sold for last year.  A good realtor will supply that info to a buyer, along with the price the sellers paid and how long ago and comps for similar properties on the market.  Tax records are public and once it is recorded, anyone can look up what a condo sold for in Hoboken.  Smart buyers can often evaluate the price of a Hoboken property better than the seller.

Why Overpriced Properties Hurt Buyers

 When a buyer walks into an obviously overpriced property it often engenders a bad reaction.  It’s like dining in a restaurant where the portions are small, the service so-so and then the bill leaves you with sticker-shock.  You leave feeling like you’ve been taken.  When sellers haven’t done their homework and overprice their condos, especially in a dense city like Hoboken where it is very easy to comparison shop, buyers get a bad feeling and may be driven out of the market altogether.  Should a buyer actually purchase the overpriced unit, it may come to light later, when comparing real estate stories with neighbors and friends.  This can often be upsetting news.  It becomes even worse when the buyer decides to, or has to sell in a few years only to learn that they paid too much when they bought and they may to have to take a hit when they sell.   Consumer confidence drives markets.

Why do Sellers Overprice?

The short answer may simply be greed.  Overpricing often backfires.  These properties don’t sell – they just become stale.  Ignorance may be the other common cause for overpricing.  Perhaps sellers should read this blog or do some research.  For example, there is a Hoboken condo for sale by the owners who bought it at the height of the market.  They lived in it with their small children (and sticky fingers), did no renovations or significant work, and had their view  obstructed by construction which still has years to go.   They are asking for more than they paid and more than other units of the same size in the same building recently sold –  almost $100,000 more – that is not a typo.  Why would a buyer pay that kind of premium for a property that, if anything, has decreased in value?  Smart buyers know what the seller paid and the sales price of the other condo units.  This property happens to be for sale by the owners.  Overpricing, however, is not limited to FSBOs.  I showed a Hoboken condo a few nights ago listed on the MLS and the listing agent was also the owner.   It was listed for $80,000 more than the last sale in the same building 2 years ago.  The sold unit was more updated, a floor lower, showed better and it still took over 3 months for the seller to get an offer.  How does this agent/seller justifies that jump in price in a market where prices have been steady since ’06?  The potential buyer walked away fast.

Sellers Beware  – Buyer Beware – You Both Need to Do Your Homework

The bottom line is that overpriced properties seldom sell.  The seller is going to go through a lot of time and effort trying to market a property whether on his own or with an agent (see part III).  Buyers, if they have shopped around, done the research and have the information will know when there is value and when there is not.  If the property for sale does not reflect value for the buyer and make him or her feel comfortable about paying the price, the sale does not happen.

Posted by Lori Turoff | Currently 1 Comment »

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

Posted by Lori Turoff | Currently Comments Off on The 3 Worst Things About Overpriced Hoboken Condos

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