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VOL. 40 | NO. 37 | Friday, September 9, 2016

Realtor math: $100K sales better than $1M sales

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The subject of affordable housing arose a few years back during a luncheon panel featuring several Middle Tennessee mayors.

The Greater Nashville Association of Realtors, which was hosting the event, was devoting a great deal of its time and resources to promote affordable housing, just as it had done for low-income housing years before and continues to work with workforce housing today.

Each mayor described the programs they had initiated and described in detail what they had done to increase the opportunities in the affordable housing market in their respective counties.

Then it was the Franklin mayor’s turn.

“We don’t have any affordable housing,” he quipped, evoking the laughter he was going for. But his words rang true. Things are different now.

GNAR’s involvement in the movement began decades ago and seems to always be a priority of the leadership of the group.

While much of this effort is altruistic and out of love for their fellow men, it is not a bad business model.

Contrary to popular belief, most Realtors would rather sell 10 $100,000 homes than one $1 million home. The reason is that the $1 million buyer is likely to stay in the home for years, maybe all they have remaining.

In the case of the $100,000 home, it is likely to be a single person. When the single person finds a mate, the Realtor often gets to sell the $100,000 – as well as the house of the new mate – and often sells the blissful couple a new house. That’s three sales.

If the couple lives in the Nashville area, each has accumulated enough equity in their homes to invest a sizeable down payment in their new abode.

While it is widely circulated that the divorce rate is 50 percent, that number comes from dividing the number of marriages in a given year by the number of divorces and has been deemed inaccurate. But of the 10 sales, the likelihood is that one or two of the couples will move in different directions.

In the case of family dissolution, the Realtor often sells the house the couple shares, then works with one or the other as there is too much discord between the former couple to serve both.

So the Realtor sold the original house, then sold that house and the spouse’s house, then sold them a house, sold that house and is now moving towards finding the newly separated partner a house – a total of six transactions.

Couples that remain together have the same three or four original transactions and often have offspring, providing the necessity to move. The pair that stays together preys on real estate together and can lead to six transactions.

Fortunately for world peace, most of the 10 $100,000 purchases follow this route. One or two will live in the homes forever, and the other will move to another city for a few years and then move back and live with the folks.

The 10 $100,000 buyers could yield 45-50 sales over the next seven years, while the $1,000,000 sits tight. If the average price of the purchases increases to $275,000, the 10 sales would spawn $12,375,000 in sales, while the $1 million buyer sits tight.

Sale of the Week

With Williamson County now boasting affordable housing, buyers are headed south. The home at 1140 Summerville sold for $175,000 after Williamson County expert Connie Lay listed it for $174,900.

Connie is with the burgeoning Crye-Leike office and sold the three-bedroom, two-bath home in matter of days.

In the financing package of her MLS report she noted the owner would accept FHA, VA, Rural or VA financing. Realtors who dwell in affordable-housing circles must be aware of a number of different financing options that those in the luxury market avoid.

Amanda Beam, a shining star at Berkshire Hathaway Homes Services Woodmont Realty, was the buyer’s agent and worked through the financial puzzle.

The home originally sold in 2003 for $124,400, so the appreciation was there. Amanda and Connie can look forward to millions of dollars thanks to their efforts in Newport Crossing in the newly affordable Williamson County.

Richard Courtney is a real estate broker with Christianson, Patterson, Courtney and Associates and can be reached at Richard@richardcourtney.com.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 0 0
MORTGAGES 0 0 0
FORECLOSURE NOTICES 0 0 0
BUILDING PERMITS 0 0 0
BANKRUPTCIES 0 0 0
BUSINESS LICENSES 0 0 0
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0