Interpreting Statistics: Sold Price vs. Asking Price

Know what the statistics represent before making a decision.

Know what the statistics represent before making a decision.

Statistics help us know what happened so we might prepare for what could happen based on the patterns we’ve observed.  It is very easy to manipulate statistics to show results that will help us gain your trust and confidence.  One of the statistics that I’ve been looking at in the Valley is the percentage of sold price versus asking price.

When a home receives an offer, those of us who think statistically and mathematically will quickly determine what the percentage of the asking price the offer represents.  On a home that is listed for $300,000, if someone offers $285,000 they have submitted a 95% offer.  This information can be very useful for the buyer to determine what to offer the seller.  If the buyer were to look at this from the percentage angle as opposed to the dollar amount, and they were willing to put in a 90% offer, we’d know that their offer is going to be $270,000.  What the seller does at this point is up to the seller, but that’s not the point of this article.

With thousands of sales every month, it is becoming easier for us to compare your property to the rest of the market.  One of the comparisons we look at is the sold price to asking price, which helps our sellers understand what to expect when they receive an offer.  What has often been overlooked is the percentage result we obtain by determining the sold price versus the original asking price.  Most reports that we run are defaulted to show the list price at the time of sale, not the list price at the time the property was listed.

I conducted a simple comparison on 16 properties of a subdivision in the west valley that were all comparable properties.  In order to obtain enough results, I had to go back two years.  I compared the sold to list price of each property and then averaged the results.  What it showed was that on average, the properties that were selling in that neighborhood were selling for approximately 95.6% of their list price.

After calculating the percentage based on the original list price, which is the price for which the seller originally wanted to list their home,  the results showed that the sold price was actually  88.8% of the original list price.

Without conducting your own statistical analysis, it is difficult to understand what someone might be attempting to show you if they don’t disclose how they came up with their numbers.  On one hand, you could pitch to your buyer that it’s likely the seller will settle upon a price that is around 95% of the asking price.  Likewise, you could show a potential seller that their asking price is far too high and that they could expect on average to settle for 88% of their original asking price.

Make sure you know when you are presented with statistics what those statistics are actually measuring, and which statistics really matter to you.

Market Update as of August 18th

As of the beginning of the week we had a total of 54,674 homes for sale, including all residential property types. By the end of the day on Sunday, our levels had dropped 1.6% to 53,767. The average asking price at the beginning of the week was $408,161 which increased less than one percent. Average days on market decreased by 5.1%.

1256 properties were sold over the past week which was 18.6% more than was sold the previous week. Word is getting out. It’s time to buy.

For properties that sold last week, the average asking price actually increased 2.83% over the previous from $241,098 to $247,941. The actual average SOLD price of the 1256 properties that sold last week was $237,968, 1.4% less than the previous week at $241,268. Those properties on average were on the market 116 days.

Handy Man Cools Off The Competition

(Note: Please know that I am an experienced DIY guy and have lived my entire life tearing into systems to figure out how they work.  I would never suggest that you attempt to repair any of your home’s systems without consulting a professional and must tell you in advance that you may be held liable in the future if your work is the cause of failure.)

If you live in a hot part of the country, you probably have an air conditioner.  Air conditioners have moving parts, and those parts are subject to wear and tear.  Hiring a service technician is usually the first thing that you do when you have a problem, and many times it is well worth the expense.  HVAC companies can and will charge a hefty price to repair problems with your A/C unit, and rightly so.  Think about it.  You’re calling them to alleviate the pain of a very hot home, and they’re out driving all day to homes that have no air conditioning.  Who’s uncomfortable now?

Recently, a friend of mine experienced a slight problem with her A/C unit.  It was making a  buzzing noise and no air was blowing.  For those of us who have ever played with a TYCO race set as a child, or an electric train set, we all know that when something electric has a buzz but doesn’t do what it should, it’s probably stuck.

Sure enough, after a $79.00 service call the results were in.  A fan motor was stuck.  What perplexes me is the solution that was offered to pacify the problem.  Apparently the technician told her that all she needed to do was unplug the unit, reach into the blower fan, move it a bit, then press the reset button.

The reset button?  There is no reset button, as I later discovered.  It turns out that the “reset button” that the service technician was speaking of was the safety kill switch that’s disengaged when the lid to the unit is removed.  It’s not a reset button.  Based on what my friend had told me, there was no longer a problem, as I had not yet explored the unit to see what was actually wrong…

…until today.  She called me frantically to let me know that her air conditioner wasn’t working again, and the solution that she had learned about from the HVAC company wasn’t working.  So, I came by to discover what I had suspected all along.  The motor was stuck.  In fact, it had completely seized.

The anatomy of an air conditioner is very basic.  Gas is compressed into a liquid.  Compression causes friction, friction equals heat.  The fan outside of your house helps vent the heat into the atmosphere.  When the liquid evaporates, it cools quickly, just like sweat evaporating from your body during exercise.  The cold liquid which travels to the unit inside your home is piped through copper tubes; very cold copper tubes.  Blowing air over those cold tubes cools the air in your house.

Blower Assembly, Fan, Shroud, and Motor

Blower Assembly, Fan, Shroud, and Motor

The blower, a simple fan, shroud, and electric motor are the components that are responsible for moving this air.

Electric motors fail over time and eventually they stop spinning because their bearings get stuck or because the motor burns out.  We called up the same service company and they quoted us $650.00 to replace the old broken motor with a new one.  Too much for my taste.  Especially since I had experienced the same type of problem with a condenser fan on my air conditioner years ago, which only cost me $89.00 to repair because I did it myself.

For this problem, within 4 hours I had disassembled the blower (an entire 3 parts), driven to my local distributor to purchase a new electric motor and capacitor, and re-installed the new parts.  My total cost for the repair was $127.00 plus 4 hours of my time and gas.  I usually consider the education part of my time value.

All in all, I’d say $50/hr is a great price compared to what would have been $162.50/hr by the HVAC company, and now I know how to do it.

Downpayment Assistance is Toast

Friends and Family, I am urging you to consider the demise of down payment assistance programs which will make it very difficult for new home buyers to own.  Currently the down payment assistance programs will be eliminated on October 1st, 2008.  This means that if you have not made an offer on a home and received approval for funding from your lender, you will lose the opportunity to purchase a home with nothing down.

Imagine you’re a first time home buyer with no money. You’re paying $1100 every month for rent, and you make your payments on time, all the time, but you have nothing in the bank with which to purchase a home. You know that renting is a waste of money and that you’re spending to make someone else wealthy but you just don’t know what to do.

Down payment assistance is your only hope. By purchasing a home that is approved for FHA Financing, which requires only 3% down, you can easily make an offer on a home with no money down by utilizing down payment assistance.

What is it?

It’s when you ask the seller to contribute a percentage of the sales price of your new home towards your down payment. The seller cannot legally contribute directly to your down payment, but they can make a donation to a non-profit organization which in turn can help you with your down payment.

It is still very possible for you to purchase a home with FHA insured financing, but you must move quickly and there couldn’t be a better time in history to purchase a home.

If you need help finding that perfect home, please call me (602) 312-3262 and we can get started before it’s too late.

Today’s Market is Unique

What a buy!!!  Just kiddin'...

What a buy!!! Just kiddin'...

It’s true!. We haven’t seen opportunities like this in years, and contrary to what the media is saying, this is one of the best real estate markets we have seen in a very long time. Why? Because sellers are desperate to get out of bad financial positions.

When mortgage companies began offering no interest loans with zero down and no proof of income required, a large portion of America decided it was time to buy a home they couldn’t afford on the hopes that it would continue to increase in value the way it had been doing in 2005. In order to get into those loans, they had to agree to outrageous lender terms and many of them went with adjustable rate mortgages without knowing it. Prepayment penalties, adjusted rates and higher monthly payments are what most of the distressed sellers are dealing with. Now that their rates have adjusted, they simply cannot afford the home that they really couldn’t afford in the first place.

With that in mind, the buyer has an advantage over the seller when negotiating a sale because the seller must get out, and short selling their home can be less damaging to their credit than foreclosure. There are a ton of properties on the market that you can get for a great bargain. Buy now, sit on your house for about 5 to 10 years, and you’ll probably experience a fantastic return on your investment. If you wait, you’ll miss out. Call me today to discuss your options. (602) 312-3262.

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