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Old 05-08-2010, 08:30 AM
 
28,455 posts, read 85,164,534 times
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I CONSTANTLY remind folks that trying to make an offer on a price/ sq ft is like buying tires by the pound.

When I have worked with sellers or buyers who become fixated on costs per sq ft I have sometimes gotten out the ads from the home improvement stores -- whether I look at the most basic of builder supplies like siding and roofing, or windows and finish flooring or even paint and wall covering (to say nothing of plumbing and electrical fixtures) there is HUGE RANGE products that VERY WELL could more than account for replacement costs that are either very low or very high.

If I further ask the clients to compare the SPECIFIC location of the property (busy corner ? quiet mid block? surrounded by nice / lower quality homes? mature landscaping?) and then also give me an admittedly subjective but still valid assessment of things like layout and design they GENERALLY will understand that there is a reason for the price that some other home fetched that should be adjusted for the subject property.

Sticking with the numbers that the OP has given , I would posit that the asking price was perhaps $899K. The offer they submitted was probably over $120K less than that. Too big a gap, and frankly the trend that I am seeing in most submarkets that I track is moving off the bottom so the sellers probably do have some basis for sticking much closer t their asking price. I can just about guarantee that the properties that changes hands for under $145/sq ft were purchased for "land value" by those looking to do a tear down and build new. Similarly the places that sold for much less almost certainly were distressed sales, sometimes the short seller or REO is in good condition and the buyer really does get a bargain, but those are "as is" sales and maybe there were problems. When those problems are severe and the buyer ends up needing to put hundreds of thousands into the place to make it habitable it is both difficult to call that a bargain and unfortunately that there in no standard methods for recording this information so appraisers are generally stuck trying to guess what the situation was and even active local real estate agents may be out of the loop...

If you have solid evidence that suggests ALL THE FACTORS that go into pricing suggest this property is not worth more than you offered then you must continue to look for a home that meets both your needs and budget.

Good Luck!
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Old 05-08-2010, 08:32 AM
 
Location: Barrington
63,919 posts, read 46,615,875 times
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Count me as another who does not rely on SF pricing.

A range of $145-240 is way too broad. That you decided $200 was appropriate is like throwing a dart.

What makes one place worth $145/SF versus $240/SF?
Is it location? Updating? Foreclosures? Timing? Something else?
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Old 05-08-2010, 09:42 AM
 
412 posts, read 937,718 times
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Thanks for all of your replies.

Regarding the range of the comps - I agree that it's way too broad, but that's what we have. We looked at each of the comps -they're all within a 10 block radius, all would have similar traffic.

We've seen the interior photos of some of the houses, and exterior photos of all of the houses. We think that the house that we made an offer on is about in the middle of the pack with regards to curb-appeal and interior finishings. The house has been on the market for about 8 months.

Chet - I know that a sales price of $145/sq ft implies a tear-down, but we're 99% sure that this particular house wasn't. It's a very new, very nice house. It's certainly possible that something is very wrong with that house. Anyway, even if we leave that house out of our comps, I still don't see $200/sq ft as being ridiculously low.

Regarding the market - the specific town that we're looking at is very nice, but the area is, economically, one of the worst in the country.

Finally, our offer had nothing to do with our budget and everything to do with paying a fair price. We're not upset that the seller didn't immediately accept our offer. We were expecting a reasonable, justified counter-offer.
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Old 05-08-2010, 09:43 AM
 
Location: Marion, IN
8,189 posts, read 31,194,199 times
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Still wondering what % off of list your offer was........
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Old 05-08-2010, 10:06 AM
 
412 posts, read 937,718 times
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Quote:
Originally Posted by Racelady88 View Post
Still wondering what % off of list your offer was........
$200/sq ft divided by $260/sq ft = 76.9%

100% minus 76.9% = 23.1% off of list.

FWIW - the average % off of list of the comps was about 20%

Last edited by skchi; 05-08-2010 at 10:35 AM..
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Old 05-08-2010, 11:27 AM
 
Location: Austin Texas
434 posts, read 1,307,587 times
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I agreed with the posts above regarding sq footage. That's just one variable and not one of the most important ones. Espesially if the house you're making the offer on happens to be smaller. The smaller the house the more $ per sq feet.
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Old 05-08-2010, 12:11 PM
 
Location: Marion, IN
8,189 posts, read 31,194,199 times
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As a seller I would likely not respond to an offer that was that far off of my asking price. I would consider that a low ball offer.

Without knowing any of the specifics of the home or the location it will be hard for anyone to know if your offer is too low.
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Old 05-08-2010, 02:33 PM
 
412 posts, read 937,718 times
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Quote:
Originally Posted by CallDerek View Post
I agreed with the posts above regarding sq footage. That's just one variable and not one of the most important ones. Espesially if the house you're making the offer on happens to be smaller. The smaller the house the more $ per sq feet.
Thanks for the comment. What variables you would consider in putting together an offer, other than price/sq ft?

I certainly agree that you can't just use price/sq ft to determine the market value, but that's not what we did at all. We looked for real comps - houses that were with +/- 15% square feet, houses that are on similar lots in the same neighborhood, etc. We're not comparing low-end houses to high-end houses or anything like that.

We just got an update from our agent. The listing agent confirmed that the sellers do have the offer and are thinking about what to do.

Last edited by skchi; 05-08-2010 at 02:58 PM..
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Old 05-08-2010, 02:56 PM
 
380 posts, read 1,060,719 times
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my last condo had previously sold for 265 per square foot, and three years later was listed by Credit Suisse for 80 psf, i offered 60 psf (75% of list), they asked for better offer, I said 63 psf, SOLD.
Determining hoa fees by the square foot can be helpful, as well as utilities and taxes.
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Old 05-08-2010, 03:08 PM
 
412 posts, read 937,718 times
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Quote:
Originally Posted by smokemaster View Post
my last condo had previously sold for 265 per square foot, and three years later was listed by Credit Suisse for 80 psf, i offered 60 psf (75% of list), they asked for better offer, I said 63 psf, SOLD.
Determining hoa fees by the square foot can be helpful, as well as utilities and taxes.
Maybe that's what we should do if the response from the seller is to submit another offer - go up, but not by a lot, and see what happens.
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