Some New Statistics

Just before the beginning of the fall selling season, it's a good idea to review some of the facts we know about the current state of real estate.  We know that Guilford, for example, has twice as many homes on the market now as have been sold since the beginning of the year.  By definition, that constitutes a buyer's market.  We know that pricing high is almost never the way to go, because one of our agents did an analysis of a shoreline agent at another company.  This second agent was known for taking listings at high prices, so we looked at what the sales results were, and the answer was striking, but not surprising.  The agent who lists high sold properties at an average of 59% of the listing price, while most other agents in the same area sold their listings at over 90% of the listing price. 

The final statistic comes from my smart friend in Madison, Wisconsin, whom I've mentioned before, because his market seems to be so much like ours.  He studied the phenomenon of "chasing the market down", which I've blogged about previously.  He looked at the selling experience of sellers who priced correctly from the start, and compared their results to those of sellers who just wanted to "test the market" or who priced their properties above what agents thought they should be for other reasons.  The sellers who priced correctly from the start got 12% more for their properties in half the time. 

What else do I need to say?

The Actual "pro forma"

This is the best term I have encountered in a long while. It has occurred to me that many agents have taken to marketing properties today with future income as if it is in place now. While this may be appropriate within reason there are two things to consider: the first is that a lender will not loan on rents not currently in place so the loan calculation must be done on current income only (meaning a lower loan amount than what could be obtained on the pro-forma rents) and second is that a buyer usually wants to know the current income as well as the projected income numbers.



I just made the mistake, once again, of telling a buyer that a property just came for sale at a 5.5 CAP since that is how it is being presented. Once I dove into the actual figures I realized that nearly every number had been tweaked to be better than actual to such a degree that the deal is actually about a 4.5 CAP today. This is a fairly big gap but not necessarily a bad deal on current figures except when your expectations have been falsely set at the better number. In other words, tell me what you are doing today and what you think you can do tomorrow and I will decide how much of tomorrow I want to pay for today.



This is for sure a pro-forma type market where buyers should expect upside but I think everyone wants to at least know the starting point beforehand. I always assume that anyone with the money to buy a building was smart enough to have earned that money first and smart enough to know the difference between pro-forma and actual. No one with enough money to buy a building is ever so easily fooled.