Where the Streets Have No Comps

Not all houses have good comparables. It might be the biggest house in the neighborhood (where we expect a lower cost per square foot), a contemporary amongst traditional homes, an odd shaped home (octagon) or simply a house in an area that has not had a lot of sales recently. How do you price one of these homes as either a seller or a buyer? A full appraisal might help but that is an opinion too. The traditional appraisal looks at comparables so we’ve got the same problem.

This is what I did for a resale property: I took the previous sales price and took that as the base price. It was the market price at the time. I couldn’t tell if there were seller paid closing costs or other concessions. I then took the data from the Case Shiller Index and applied it to the base price through today. There was conversation about the specific neighborhood beating the Index; real estate is local of course. Using a Trulia Heat Map, we discovered that the neighborhood over the last few years has been ahead and behind Portland at times but has converged to even now.

We had a list of seller completed remodel items. We placed the buyer’s value to each. Our offer price: (base price) * (Case Shiller appreciation (depreciation in the last few months)) + (Trulia Neighborhood Heat (zero in this case)) + (Buyer’s valuation of Seller’s remodel and projects). The offer comes out at 91% of the asking price.

The seller countered. They have had activity and only a short time on market so they *think* it is worth more. Would you?

5 Comments on “Where the Streets Have No Comps

  1. If the house were listed at $679,000, then at 91% the buyer’s offer would be $617,890. A difference of $61,110.

    I suspect that most sellers would counter.

  2. So what out of all these steps could the buyer NOT do him/herself?

    Find the previous sale price √
    Use Trulia heat map √
    Apply Case Shiller √

    The buyer will be lucky to get 85 percent of the asking price. This market is tanking, and will continue to do so.

  3. Case-Shiller is a backward looking statistic.
    Since housing prices are continuing to soften any offer should include expectations of further decline. Apologies to daycare for

  4. That’s an interesting strategy, using tools that I use myself. It’s great having all these different data sources these days.

    If the seller has multiple offers and multiple interested buyers then they’re still in the driver’s seat. If I was your buyer I wouldn’t offer much more, maybe 1-2%, if I thought that the price was fair. Especially as I think we’ll be down another few % over the next year, if not more.

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