The Listing Price the Neighbor’s Sale Does Not Support
A homeowner wants to list at $429,000 because the house two doors down sold for $425,000 last month. Agent Priya’s CMA shows: Subject-2,100 sq ft, 3BR/2BA, 0.25 acre, 2-car garage, no basement, updated kitchen. Comp A-$425,000, 2,300 sq ft, 3BR/2.5BA, 0.30 acre, 2-car garage, finished basement, dated kitchen, sold 30 days ago. Comp B-$389,000, 2,000 sq ft, 3BR/2BA, 0.22 acre, 1-car garage, no basement, updated kitchen, sold 60 days ago. Comp C-$405,000, 2,150 sq ft, 3BR/2BA, 0.25 acre, 2-car garage, no basement, original kitchen, sold 90 days ago. The market has softened about 1% per month, and appraisal contingency is typical.
1. Using reasonable adjustments, derive an adjusted value range and explain whether $429,000 is supported.
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A defensible adjustment set is: GLA $80/sq ft; half bath $2,500; garage bay $8,000; lot $2,000 per 0.01 acre; basement $15,000; updated kitchen versus dated/original $10,000. Declining market: 1% per month downward adjustment to the comp.
| Comp | Sale price | Adjustments | Adjusted before market | Market adjustment | Adjusted value |
|---|---|---|---|---|---|
| A | $425,000 | -$16,000 GLA; -$2,500 half bath; -$10,000 lot; -$15,000 basement; +$10,000 kitchen | $391,500 | -1% (-$3,915) | ~$388,000 |
| B | $389,000 | +$8,000 GLA; +$6,000 lot; +$8,000 garage | $411,000 | -2% (-$8,220) | ~$403,000 |
| C | $405,000 | -$4,000 GLA; +$10,000 kitchen | $411,000 | -3% (-$12,330) | ~$399,000 |
The adjusted range is roughly $388,000–$403,000, with a midpoint near $397,000. The $429,000 target is not supported: it relies on the neighbor’s gross sale price while ignoring that Comp A is larger, has an extra half bath, a bigger lot, and a finished basement. Price per square foot alone would also mislead because of those differences.
2. The seller insists on $429,000. What risks and alternatives should Priya document?
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Priya should document the CMA and explain that overpricing creates predictable risks:
- The listing may go stale, leading to larger price cuts later.
- Buyers who need financing may face an appraisal gap if the appraiser values the home near $390,000–$400,000.
- The seller may lose negotiating leverage after weeks of no offers.
A better strategy is to list near the supported range-perhaps $399,000–$405,000-and test the market with a review date. If the seller insists on $429,000, Priya should record the seller’s written instruction, avoid promising a sale price, and set expectations that a reduction may be necessary. She should not simply refuse the listing, but she should not present an unsupported price as her professional opinion.
3. A buyer offers $405,000 with 10% down and an appraisal contingency. What is the likely appraisal outcome and financing risk?
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The appraiser is likely to weight the adjusted closed sales and conclude a value around $395,000–$405,000, not $429,000. If the appraisal comes in at $400,000, the lender will base the loan on the lower of price or appraised value. At 10% down, the buyer’s intended loan on a $405,000 price is $364,500, but 90% of $400,000 is $360,000. The buyer would need an extra $4,500 in cash or would have to renegotiate the price.
Priya should flag the appraisal risk before ratification and counsel the seller that a $405,000 contract is not the same as a guaranteed $405,000 net. The buyer should confirm they can cover a modest appraisal gap.