Chicago real estate, living and neighborhood perspective

Rock Bottom

By Sherwin Sucaldito on July 1, 2010

Recently, I have been noticed several instances of traditional resales being extremely overly aggressive in pricing.  Two condos, both located in recent newer developments less than five years old were selling $55-100,000+ less than what comparable units were selling in for in the association.  One unit the difference accounted for 33% of the market value, the other for 20%.  This was also observed in several townhome and single family resales, where the prices were lower by $75-150,000 and accounted for approximately 15% of market value.

In all cases, none of the sales were distressed sales, or at least were not disclosed to be.  Going through public records, no lis pendens were recorded either.  Several of the homes had low LTV (loan to value) recorded, so the sellers were basically losing a large percentage of their previous down payment.  In one instance, it was mentioned that the seller was bringing cash to closing on the difference.

This brought on several conundrums; if the economy is that “bad” and recovering, why were the sellers so eager to quickly lose such a large percentage of their potential home value from the on-set.  Perhaps the market is difficult and homes do not sell quickly or at all in the area.  However, in each instance several sales have occurred recently to not only reiterate home values, but market time was relatively low, approximately 60-150 days, and only one of the condos had comparable sales with market times averaging 175 days.  Considering the general market, the fact that comparable sales have occurred and accrued relatively low market duration does not indicate of a difficult market or lack of potential buyers.  The homes are all in above average to extremely good condition, needing no work, except for any cosmetic changes based on personal preference.

So given the information above, potential buyers could look at the homes and think they have found their diamond in the rough.  Oddly enough, one of the condos is still on the market with a price reduction.  The other condo is temporarily off the market.  The other home was canceled off the market after several months of market time.

So why haven’t these homes sold when others have shown the ability to do so?  Lack of a skilled broker?  Two of the homes are listed by recognizable agents and companies.  One of the condos is located in a very desirable area, and have seen continued sales and pending contracts occur.

Perhaps the problem isn’t really anything physically wrong with any of the homes, but rather the psychology behind it.  With distressed sales very common today, there may be buyers reviewing these homes and thinking that based on pricing they are tentative to third party approval.  I myself approached these same properties thinking the same thing.  But then again, after some research a savvy buyer, or their agent could come to the same conclusion that I have arrived to and noticed that they are not distressed sales.

Maybe there is something wrong with the home.  Without being party to the transaction I won’t know for sure, but none of these properties have seemed to have gone under contract.  Perhaps pricing too aggressively warrants more questions and concerns than excitement.  Purchases are still partly psychological as well.  The sellers may have been better off discounting perhaps $25-50,000, credit closing costs and market as motivated sellers if they were willing to take that large of a loss from the get go.

Sherwin is a REALTOR® in the Chicago & Suburban area with @properties. Questions can be forwarded to Sherwin Sucaldito

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”Rock Bottom” by Sherwin Sucaldito is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
Based on a work at Realty Evolved

Realty Evolved