Recently I showed my client a condo in a building where I had made a sale in the summer of 2017. Before even seeing the place, I knew it was overpriced. This was based on my knowledge of the market and this particular building.
What was interesting to me was that it was clear as day that it was overpriced, but the agent thought it would sell quickly when they first hit the market, and didn’t know why it was sitting.
When you are determining market value for a property, you have to take a multitude of factors into consideration. Sure, if this is a condo building that was gut rehabbed in 2008 and the same size unit directly underneath you sold 6 months ago for $350,000, you should be able to get $355,000, and price it somewhere in the range of $350,000-$360,000 depending on time of year and urgency to sell.
However, what if a unit in your building hasn’t sold recently? Or what if it’s a different floorplan facing a different direction? What if your best comps are on different streets with various levels of traffic? You have to look at the whole picture and get creative sometimes when assessing what the market will determine is fair market value.
The subject property is 1438 W Roscoe St. #1. They originally listed at $280,000 in November 2018. The last sale of this unit was April 2015 for $240,000.
Let’s look at the macro-view first. This list price would indicate an appreciation of 16.7% in 3 years. While we have seen growth in the Lakeview neighborhood over those 3 years, that is higher than the actual rate.
If we look at the data (below) for Lakeview 2 bedrooms (traditional, re-sales; i.e. no new construction or foreclosures, short sales, etc.), we see that the average sales price in April 2015 was $352,750 and in November 2018 was $380,098. This indicates a 7.8% increase in average sales prices, or about 2.5% per year.
If we take the 2015 sales price of $240,000 and add 7.8% we get $258,720. Now, this is just one overview of the home’s value. We can’t use this number exclusively because the owners may have overpaid or underpaid in 2015 and lots of factors are affecting the average sales price. But it can be a loose guide for us.
Deeper Dive into Data
The more interesting part of this scenario is that this is a courtyard style building and the ones in the back of the building, furthest from Roscoe St., are up against the brown line L tracks. What this agent told me was that there was a recent sale in the building at $285,000 so they thought they were good at $280,000.
Turns out that sale was on the southeast side of the building, facing Janssen street (3400 N Janssen Ave. #1). It sold for $285,500 in the SPRING of 2018 after listing at $292,000. While this home is similar enough as a comp, especially given it’s in the same building (and despite the fact it’s slightly larger with a slightly larger 2nd bedroom), the HUGE difference here is that this was away from the train tracks. And the difference between a unit away from the train tracks and one next to them is valued more than $5,000.
Both of these units were on the raised first floor, above the garden units in the building, which is nice to have since people value that added security over a ground level unit. But to get an idea of the true market value, it helps to look at relative values of other sales in the building in previous years.
It just so happens there was a great example from 2017. In August of that year another unit sold in the Janssen tier, 3400 N Janssen Ave. #3, and it closed for $269,900, full list price. 1436 W Roscoe St. #2 sold in August as well, at $244,000.
1436 W Roscoe St. #2 backs up to the train tracks. Both the 1436 and 1438 Roscoe tiers are in the back of the building, next to the tracks. They are essentially mirror images of each other. So this is an excellent example of relative value.
The main differences to point out here are that 1) 3400 N Janssen Ave. #3 is the top floor, which is more desirable; and 2) 1436 W Roscoe St. #2 was a cash deal, so they probably got a little discount. It was under contract after 3 days, closing for $6,000 under their list price.
Between these two items, I would apply about $5,000 of value for the difference in floor height and another $5-10,000 for the cash offer. So, to get the relative value compared to 3400 N Janssen #3, I would add $12,500 to 1436 W Roscoe St. #2 to get $256,500.
This means the difference in value for units away from the tracks to ones next to them is about $13,400 more (the difference between $269,900 for Janssen #3 and adjusted sales price for 1436 W Roscoe St. #2, $256,500). That is what I find with other similar buildings too: every tier is worth about $10,000 more than one closer to the tracks.
So back to our subject property at 1438 W Roscoe St. #1. They used the Janssen #1 comp to justify their price. Janssen #1 sold at $285,500 in the spring. 1438 W Roscoe St. #1 listed at $280,000 in the late fall of the same year. If they used my analysis they should’ve listed at $272,100, and since it was the slower time of year I would’ve listed at $270,000.
After some time on the market and price drops it just closed on April 25th…
BUT! They were offering a 1% closing cost credit as well bringing the NET total for the seller to $267,300.
I estimated the value at $265,000 during the slower time of the year. They were lucky that the market time didn’t hurt them with price. Granted, it wasn’t a huge difference in list price, but that’s the thing: in a market where values are peaking, buyers are super sensitive to price. And $10,000 is about 4% of the sold price. That makes a difference at this price point in the market. Plus, a unit like this next to the tracks will have a more difficult time selling in the slow season just because of the tracks. It needed the busy spring market to have enough interested buyers to get them an offer.
Everyone’s goals are different and I like to discuss all the factors affecting listing price when sitting down with a home seller. I give it an extraordinary amount of thought, usually giving a list price range after first meeting and honing in on a price as we get closer to going live, sometimes the day before listing.
For this home, I would’ve suggested listing at $270,000 in the fall of 2018 and selling for $265,000+. And for the spring, I would’ve suggested listing at $275,000 and getting close to list price. There are more buyers in the spring and places can command a few higher percentage points during that time. If you list in the fall/winter, you need to incentivize the few buyers out there to choose you over your neighbor. That is done by having an attractive price and looking beautiful during showings.
If you’re thinking about buying or selling, let’s discuss your plans. I use market data and your goals to determine the best price to list at to achieve the success you’re after when selling. And I prevent you from overpaying on a property when buying. The internet has made it seem that pricing a property is easy when in fact there are so many factors to take into consideration it’s virtually impossible to do without someone that has firsthand experience and current knowledge of the market.
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