Sometimes You're Off by 43%

By Dave Fratello | November 8th, 2019

Pricing a home can be hard.

A PPSF calculation will get you only so far.

Maybe there aren't any truly comparable properties to go by.

Perhaps the seller is a little ambitious. (Or, perchance, delusional.)

So what are you going to do?

Some agents will stress the importance of setting a reasonable market price before listing a property.

Others will simply go along when a seller wants to shoot the moon.

And then market observers will watch, and eventually savvy buyers will pounce... if the seller really is a seller.

This is called to mind by the recent closed sale at 3201 Alma.

It's a 1930-vintage cottage on a valuable 1800 sqft. walkstreet lot with ocean views.

We've been pretty frank in writing about this property on the MB Property Ticker.

Here are three entries:

- "For some reason, 1800 sqft. walkstreet lot at 3201 Alma starts at $3.900M"

- "Walkstreet corner cottage/lot sale (1800 sqft. lot) at 3201 Alma cuts $500K from super high $3.900M to very high $3.400M"

- "Not sure why cottage/lot sale (1800 sqft. lot) at 3201 Alma began at $3.900M, but after 2 mos. it's down to 'only' $2.999M"

So, yeah, we really didn't get it. $3.900!

The sale has closed now for a bunch less: $2.225M.

That is not just $774K below the last asking price.

It's $1.675M below the first price.

That's 43%.

They overpriced by 43%.

Did they not know they were doing that?

This could be a recent record of some kind, but we're going to have to go check the spreadsheets. Don't wait.

One reason we knew the first price was way out of whack was because Dave and the Edge team last year worked with buyers on a somewhat comparable walkstreet property nearby.

2601 Alma (5br/5ba, 3650 sqft.) also started out quite overpriced.

The launch price was $4.000M in May 2018, with a cut about a month later to $3.775M.

By mid-July, a cut to $3.495M finally showed that the seller was thinking of finding a buyer.

About a week later, multiple offers began to stack up. It seemed like everyone was still shooting lower, but at least there was action.

Dave's clients prevailed, purchasing the sizable home with 60' of walkstreet frontage and helicopter views for $3.360M.

Now, that's a full-sized house on a full-sized lot (2700 sqft., 60' x 45').

That's why it was so obvious when 3201 Alma began more than $500K higher for a little cottage and 1800 sqft. lot that the asking price was out of line.

Or, you could have just looked at it and said, "$4M for that? No way."

Looks like the real value was about half that.

Our rule is that properties that start out overpriced tend to sell for less than they "should" in the end.

It's a little tough to identify comps for an 1800 sqft. walkstreet lot, but there was a sale last year that you could use as a guidepost.

316 28th is a corner lot at Crest, a half block below Alma.

It sold off-market in June 2018 for $2.900M.

The lot size is 2210 sqft., an unusual 74' wide and 30' deep. There can be very good views from a new build.

If we assumed all things were equal, the land price per square foot on that property translates to $2.362M for 3201 Alma. Obviously, it sold about $140K lower.

We're not so sure all things are equal. The walkstreet frontage should be worth more.

But things are different in MB these days, different in the Sand Section, different at the higher end where people are paying $2M+ for dirt.

We're sure about one thing. They didn't pay 43% too much.

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