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Now that there are sites like streeteasy that show a property’s history of price cuts and time on market, can you use them to identify a bargain?

This came up on the streeteasy boards today, and many responders said “yes.” I say “NO” — here’s why:

As an agent, while I appreciate the fact that an apartment’s price history is now transparent to everyone, I disagree with putting too much emphasis on past price drops, time on market, etc.

When you give too much weight to that information, you are letting the seller “frame” the negotiation.

What if, for example, the seller was overly optimistic when they listed and had four price drops since? They might still only be “near” market, and it’s unfair to other listings that were more properly priced to assume that the one with a declining price history has a discount.

Let me run an example: say Apartment A and Apartment B are each “worth” $1 million.

Apartment A is listed conservatively at $1.1 million, but the market is slow, and it sits. Apartment B is listed a little later, rather aggressively at $1.6 million, but that is overpriced, so the seller corrects the price, and drops $100K each of four times, to end up at $1.2 M.

If you bid based on history, you start to assume that Apartment B “must” be a deal, because its seller has been correcting over time, and it hasn’t been on the market long. However, a thoughtful bid on Apartment A — which looks like a dog based on history alone — is more likely to snag you a “correctly priced” apartment.

I would strongly urge buyers to value an apartment by looking at comps — historical comps will show you how the market is trending, and on-market comps will show you what alternatives you can get for your money.

To do it any other way is to fall for the seller’s marketing.

Posted in For Buyers 11 years, 9 months ago at 9:51 am.

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