Pricing a million dollar property under the million dollar range
I recently shared with a property owner the following thoughts in regards to her concern with the right price for a property that has been in the market over a period of several years since the market crashed. The property was originally listed at about $1.5 million and had suffered several discounts. But now, it was time to review if it was appropriate to move it to another price range. I hope this helps other property owners define the course of action in regards to pricing their property in a price range that is more realistic to the actual market conditions.
In a slow market, bringing a million plus property under the million dollar range would definitely be more appealing to a prospect buyer and would put the property ahead of the competition. It is a fact that serious buyers with cash on hand are mostly focusing their searches on properties with large discounts. A large discount can also be used to give the property additional exposure, because it can be offered with direct marketing efforts as a bargain. But it is important to keep in mind that no matter how low you go on price, you will probably still receive a lower offer and a strong negotiation process would have to be started in order to reach a price agreement.
Our experience in Costa Rica with sales in the million dollar range, since the market slowed down, has been that properties have sold with discounts from 30% of up to 50%. Whenever we have put a low offer on the hands of a seller, the first reaction is one of disappointment, but we always tell the seller the process is just starting and depending how serious the process gets, a price agreement might be possible to be achieved. Property values have changed worldwide, and sellers in the million dollar range tend to put on the balance the advantages of selling for a lower price against the disadvantage of waiting for the unknown... not knowing when another serious buyer will put a formal offer on the table. On the other hand, there is also the possibility that the seller could take advantage of the market conditions and invest some of the money in another good deal somewhere else. The added value of having peace of mind and continue on with their lives, has been of major importance when making a final decision about selling. Just recently a property owner who sold his property a couple of years ago as a distress sale, called me to share that even though he sold his property as a fire sale, with the money he got out of the deal he installed a new company in his country of origin, which has been very successful, and also invested in buying properties as short sales, making good money out of each deal. He said he already recovered whatever money he lost in that deal and also has more than doubled the money he has invested.
In Costa Rica, at present there is not a centralized MLS system to keep the official global data of properties that have sold and for how much they have actually sold. That information would have been very important for doing a market analysis of comparable properties which have sold in an specific time frame, because it would have given property owners back up information for them to feel comfortable about reducing the price on their property and how much the price reduction should be applied. Since we don't have the official data, at least I can give you some examples based on our experience. For example we sold a property in Heredia with majestic city views, three houses and 4.8 hectares of coffee fields, matured trees and manicured gardens for $630,000 and it was listed for $1.2 million. In the case of another property near the same area, even though the owner reduced the priced considerably, she finally decided to rent it because it would not sell. Some months before, we brought her a formal written cash offer for $850,000 which at the end didn't work out because she had another buyer and at the end that other buyer never came through.
On the other hand, just to give property owners a few examples of properties that have sold in Escazu, which is a market that has more demand in Costa Rica, in December we sold a property that was originally listed for $1.5 million and sold for $850,000, earlier last year another one that was listed for $1,3 million and sold for $870,000. Beginning of 2011 a beautiful property in San Antonio de Escazu that was listed for $1.8 million turnkey and sold for $1.1 million turnkey. Middle of last year, one that was listed for $1,365,000 and sold it for $850,000 turnkey also. In Santa Ana, a property that was originally listed for $2,360,000 is selling for $1,700,000. These numbers are clear facts of what is going on in the market with high end properties for sale, and another true fact is that the inventory of million dollar homes for sale is growing exponentially, meaning that month after month your property is competing against more and more properties in your price range. To add more to this trend, we also receive frequent calls from sellers reducing the price on their properties, making the market highly competitive, and pushing the prices down. For example, a beautiful mansion in Santa Ana that we had originally listed for $5.5 million, the owner recently called to say if we find a buyer with $3 million he will sell. Another mansion originally listed for $2.5 million, the owner is ready to take $1.5 million.
Property owners have become more realistic about the importance of pricing their property right, so it does not sit in the market for years without results. Click in the following link to view luxury real estate in Costa Rica for sale as Fire Sales and Bargains: http://www.costaricaluxuryestates.com/index.htm
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