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How to factor short sale comparable values into offer price?

Is it reasonable to expect/ submit an offer to purchase a NON-shortsale property for the average sq. foot price of recent comparable sales that were shortsales?

Background: My Realtor provided 4 recent properties that have sold near the house I am interested in. 3 of the 4 were short sales. 3 of the 4 (not all short sales) were at least 600 square feet larger, with the 4th about 150 sq ft larger. The three short sale properties final sale price worked out to $75, $93, and $96/ sq foot. The non-short sale sold at $130/ sq foot.

The property I am intersted in has been listed since mid-July and they are asking $177,900 (with one $2,000 price drop a week ago). At 1408 sq ft, it works out to $126/ sq foot. If I consider all of the comparable sales for a straight sq foot comparison- I think the property would need to come down considerably.
  • October 06 2012 - Active Bethel
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Answers (5)

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Great question, as I'm going through some of the same calculations on a home in another state I want to buy. First, forget the per-square-foot valuation. It may make sense if you're comparing, say, new construction homes with the same amenities, but it does't really work for what you're trying to do.

Second, make sure the homes are within 10% or 15% of the size of the one you're interested in and within a mile or less. Age should correlate, as should style (i.e., single-level homes don't compare well to two-level homes). And condition!

Now, the red meat: I calculate home values for a living, so you'd think I'd be able to do it in another market area. Not! But I found myself overthinking the issue, and I see you doing some of the same. At some point, you either want the house or you don't, and trying to price it right down the the gnat's petootie becomes more of an intellectual exercise than a home purchase.

In my case, I pretty well generally know what the house is worth, and if I overpay a little, so what, because the home is in the location I want and at the general price I want to pay. In my business, I see people every day who are mortified of overpaying (for good reason, given the meltdown), and suddenly, I find myself in their shoes. But I just took a step back and focused on what I wanted to do.

If you want good data, go to Redfin's website, set up an account and use their home pricing tool. It's very, very good. And don't worry about someone contacting you. They leave that part up to you.
  • October 07 2012
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Is it reasonable to expect/ submit an offer to purchase a NON-shortsale property for the average sq. foot price of recent comparable sales that were shortsales?

Number one, utilizing a $$/sq ft method is not suggested, its like thinking a large brain makes one smarter than one with a small brain.

Short sales may be factored and calculated into a value of a home, but it really differs between areas. Some areas I appraise now have NO short sales, some areas ALL short sales. Both in the LA area.

Hire a Realtor who knows whats going on , or hire an appraiser. You can NOT figure out a price by $$/sq ft, which leaves out, views, lot size, condition, quality, bedroom count, pools, location, traffic noise, adversities, actually EVERYTHING except size of the house. If those things are NOT important to you, then yes, use only a $$/ sqft method.

Intereste rates, seasonality, us being in an election year, or just liking a home plays more into the VALUE of a home than simply numbers...


  • October 06 2012
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How long have you been looking for a home?

It looks as though you are trying to make adjustments to comparables that an appraiser would make. If you want to attempt that, talk to an appraiser and find out what the adjustments are worth for your specific neighborhood.  Each of the components that you mention are valued differently in each area. I'm a firm believer that the SF price is very low on the priority list of values because there are so many things that effect it.

I've been asking my customers to put aside the list price if they've seen 15-20 homes.  compared to the homes that you've seen, regardless of what the home is listed at, what do you think its worth to YOU.

You very well come up with an offer price that is well below the list price and if it doesn't insult the seller, it isn't low enough.  You'll never get another opportunity to lower your price again as much.

The other side of the coin is very simply: what will the seller let it go for?  That may have nothing to do with the list price (though it may have everything to do with the list price) and you won't know until you make your offer.

Buying real estate is not a very analytical purchase.  If you really like the home that justifies $$$$$$.   Comparables are only a small piece of the puzzle.
  • October 06 2012
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There is really so much more that goes into the value of a home other than the square footage; condition, number of bedrooms and baths, age of the home, amenities, etc. If you are getting a mortgage, the lender will send out an appraiser and you won't get a mortgage for more than it appraises. I suggest you listen to your Realtor and make a fair offer. Your Realtor will understand the area and the home you are interested in and can provide you with good advice as to a fair market value.
  • October 06 2012
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Appraisers don't really differentiate between regular sales and distress sales although they make allowances for condition. And it is the appraisal that determines the value.
  • October 06 2012
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