Buyer Beware – Only 50% of All Homes For Sale Are Reasonable Priced!
Comparable home prices in San Miguel have always been all over the board and a large number of overpriced homes is not unusual (explained below). However, currently the number of homes that are overpriced is just off the charts.
In April of 2020 we created an algorithm to compare every home on the market against what our extensive database calculated would have been the home’s value at the peak of the market in mid-2018. Considering that based on 2019 sales, market values had already dropped between 10% and 17% from 2018, the results of our algorithm were shocking.
We found that slightly over 40% of the homes currently for sale were still priced at or above the peak prices of mid-2018. The percent of “overpriced” homes went to more than 50% when you take into account the price decline of 2019. Of course “overpriced” is relative, but we’re not talking about just 3% to 5% overpriced. Graphing the overpriced homes compared to actual sales in 2019 showed a fairly evenly spread ranging between 1% to 56% overpriced.
What this means?
- First and foremost, it means that as a buyer you should work with a seasoned agent who has a good handle on pricing and can help you quickly weed out the overpriced homes that are on your list.
- Instead of selecting one home, you may have to select three or four, start making reasonable offers with the advice of your agent, and see how it goes. If the seller of you first choice home isn´t responsive to your offer, you may have to move on and try the same strategy with your other choice of homes – or just pay more than you should.
- Time on the market may or may not mean anything. I have seen new homes listed for sale in the past few months which are priced very aggressively from the beginning and which are often 20% to 35+% below the peak price of 2018. Yet at the same time, I have also received for example a “20% price reduction” email, presented as though it is the best deal ever, when in reality the property is still priced higher than what it could have sold for at the 2018 peak of the market.
What it doesn´t mean?
- It doesn´t mean that there are not reasonably priced homes. The optimist would point out that 50% of the homes on the market are reasonable to aggressively priced. As I have mentioned in several other market updates, there are always reasonable sellers and often some very motivated ones who have already priced their properties below where the market will probably go.
San Miguel always has a lot of overpriced homes.
Since I first started in real estate in 2006, this has always been the dynamic in San Miguel. In my opinion, this happens for three main reasons.
- It is more difficult to accurately price a home here than in other cities and official appraisers really don´t exist for pricing a resale home. Since San Miguel was not built in subdivisions of very similar homes, it is not uncommon to find a home worth hundreds of thousands of dollars next door to a tear-down home with little value other than the land. Then each block of a neighborhood has different pros and cons, which makes establishing a realistic value very subjective.
- It only takes one buyer! Since the carrying costs are so low in San Miguel, this is the attitude of way too many sellers. Either through bad advice, or hearing of others who won the “I sold my home for an outrageous price” lottery, or just pulling a number out of the air, they put their houses for sale at an unrealistic price waiting for that one buyer to show up – and it works for about one out of 50 every year in my opinion, but leaves way too many overpriced homes on the market. Although most seasoned agents don´t even want to take the listing, they do it because SMA is a small town and their reputation will be soiled if they don´t.
- Agents play the game too. Most resale homes in San Miguel are listed via an AMPI agent (equivalent to NAR). The common practice is to introduce the property during the network meetings and then have an open house where each of the agents who attend is asked for their price opinion. Every agent wants to see their seller make the most money, so even the more seasoned agents will put the price higher than they know it should be hoping that they get support from the other agents who attend. However, even when the consensus is that the price should be several percent lower, the fictitiously high price has become a benchmark to the seller and they are often resistant to lower the price until some time passes. So this results in a large percentage of homes price 10% or more over what they should be and the price probably won’t be reduced for months if not years
Because of these three primary factors, and in my opinion, 50% of the homes for sale in San Miguel de Allende are always overpriced. However, historically I would say the range would only be five to fifteen percent compared to today's 40% to 50%.
In conclusion, find an agent who knows the inventory well and can help you weed out the overpriced homes and focus on the ones that are reasonable if not aggressively priced so that you don’t become one of the buyers who overpays for a home.
Of course, I believe that the agents of Realty San Miguel are the best trained and will give you the best representation possible.