Not all Developer Closeouts are Under Priced
You’ve probably seen real estate ads for Myrtle Beach condos and “developer closeout inventory” touting “best deals” and prices “better than foreclosures.”
WARNING: That is often not the case.
Yes, it’s true, developers have slashed their prices, in some cases by up to 50% off market highs, but that does not mean the property is priced below the current market. You’ve got to look at both resales (resales is the operative word … more about that later) and also competing active inventory.
Don’t make this $70,000 mistake
Not long ago, we appraised a developer closeout unit. The buyers thought they were getting a great deal, because their $308,000 contract price was $92,000 and $107,000 below the last two developer sales.
But it was overpriced by $70,000! Resales were listed and selling at $210,000 to $240,000.
If that couple paid $308,000, in order to resell, they’d have to drop their price by a minimum of $70,000. That’s a huge loss.
Sadly, many cash buyers, who are not mandated by a lender to get an appraisal, have no clue about resale prices and active competition.
I cannot stress enough the importance of hiring a knowledgeable, savvy, experienced appraiser to at least confirm you’re not overpaying. You don’t need a full-blown appraisal to get an unbiased value conclusion from an independent appraiser. Many appraisers will grid up sales for a reduced fee, as we did for this investor from Washington, D.C.
Not all developer closeouts are overpriced. Some truly are below the market. As with any investment, you’ve got to exercise due diligence to make sure you’re not throwing away your money.
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Posted September 16, 2012
By Kay Van Hoesen
Email: kay@certifaxappraisals.com
Phone: 843-497-9155, Ext. 103
Kay Van Hoesen
Kay Van Hoesen is founder, senior appraiser and owner of Certifax, Inc. with local appraisal experience since 1986. Together, she and her staff have developed more than 35,000 appraisals for over 3,400 clients.
Kay is a state certified residential real estate appraiser in both South Carolina and North Carolina as well as FHA-approved. Additionally, she is a licensed real estate broker in South Carolina, a participating member of the National Association of Realtors, the Coastal Carolinas Association of Realtors, and an Associate Member of the prestigious Appraisal Institute.
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