Sunday, June 08, 2008
We've had an unusually large amount of sargassum (above) washing up on our beaches in the last few weeks since the west winds turned east. Lots of cool little creatures live in this weed when it's floating; crabs, shrimp, sea horses, baby fish and so forth.
I posted back in February in the "Blue Pill or Red Pill" post about the percentage difference between asking price and selling price for condos closed that month. I am seeing more and more buyers keying in on the discount off asking price rather than looking at the final number. Macy's has successfully cashed in on the mentality of big discount = great deal while Wal-Mart and Target have successfully exploited the strategy of low regular prices. It's a natural to want a big discount when purchasing something. It feels good to find a $200 dress at 50% off regular price and then to get an additional 50% off at the register. Great deal, huh? Not if that same dress is $45 regular price at Target. It's just that the Macy's model makes us feel like we got a better deal.
For your consideration here are the first seven condo sales to close in the month of June and the selling price as a percentage of last asking price and the percentage of original asking price.
Ocean Estates - $560,000 - 93% of asking price - 83% of original asking
Emerald Seas - $530,000 - 88% of asking price - 78% of original asking
Saturn Condo - $135,000 - 96% of asking price - 84% of original asking
The Oaks ------- $95,000 - 91% of asking price, this was original asking
Waters Edge -- $354,325 - 96% of asking price - 71% of original asking
Atlantique------$150,000 - 91% of asking price - 68% of original asking
Meridian-------$695,000 - 99% of asking price - 99% of original asking
The point here is that expecting a big discount off the current asking price is probably a recipe for disappointment. Only one of the seven sellers this month accepted less than 91% of their asking price although almost all took a severe discount from their original asking price. Most sellers in this market have had to get through a period of denial to get to a point where they were willing to consider accepting much less than their original idea of their property's worth. To get a good deal in this market it helps to have access to the true listing histories (not readily apparent on the MLS without some digging) and awareness of very recent comps. Armed with this knowledge a savvy buyer can target the listings that are within striking range of fair value and/or those that have gone through several price drops and work towards a number somewhere south of today's value. Your mortgage lender does not care what the asking price was, only what you are actually paying. Forget the discount and focus on the final number. That's the only one that matters.
"Knowledge is of no value unless you put it into practice."