There is a house we had listed in our office (before I was working here) in 2006. It was a new construction (built in 2005, actually, and sold in February 2006). It has four bedrooms, four and a half baths, 3000 square feet, and sits on 2 acres. It has a sunroom, a garage that accommodates 3 cars (one single door and one double door), a deck in back, a screened porch, a gas log fireplace, and a security system. This was as it was listed back in 2005-2006. The list price was $299,000. It sold for $270,000.
Fast-forward to today. It's on the market again, with the owners' selling agent from 2006 (who does not work for the company I work for). I looked at the listing, checked the photographs (there are only two, both exterior, of the front from two different angles). There is very little difference in the house from then until now. The only changes I can find are the size, now listed as 3300 square feet, and they've replaced the vinyl flooring in the eat-in kitchen with ceramic tile. The list price is $330,000.
Think about that. From a sale price of $270,000 (list price is irrelevant – wish in one hand, poop in the other, you know the saying) a bit less than three years ago, to $330,000 today. Even calculating from the original list price of $299,000, that's an increase in value of nearly 11 percent in not quite three years. The average price change for homes in this area in the past year has actually been a slight drop, about 2.3 percent. Even when prices were going up, it was only about 2-3 percent a year. So a jump of 11 percent in a tad over three years in the market we actually have (not the one we would like to have) is, to be blunt, insane. When you calculate from the actual sale price of $270,000, it gets even more ludicrous -- about 22 percent.
I was looking into this one day, because I'm nosy and at the time I didn't have anything more pressing to do. I looked up the owners' mortgage information at the county tax assessor's website (it's public information; you can find anybody's mortgage info online or go to the courthouse and see it).
Here's their problem -- they're upside down.
How did they manage that in such a short period of time, without starting out that way? Easy. Back in April of this year they refinanced. A local credit union refinanced their house for $297,000. That's quite a leap in a little over two years, from $270,000 to $297,000. I don't know what they did with the money, as the only real change in the house itself I can see from one listing of the house (in 2005-6) to the next (2008) is the addition of ceramic tile in the eat-in kitchen. I can't figure out where the additional 3,000 square feet came from. But I don't care what you're tiling with, that wouldn't run you $27,000.
So, as they refinanced seven months ago, their equity is negligible. They're now trying to sell the house and are also trying to cover their closing costs and the real estate company's commission. So they're asking $330,000.
My crystal ball is busted, but I know the market and I don't see it happening. Not in this market.
I wonder if their agent explained any of this to them, and they insisted on the price they're asking. That's possible. But it won't sell for this price; she's wasting time, marketing money and energy on a severely overpriced listing. Sooner or later she's going to have to tell the sellers they need to get a clue, or get another agent.
Assuming she has the backbone to do that. Not everybody does.
That's your Real Estate lesson for the day. You're welcome.