There's always a lot of talk about what the market value of a home is. Two recent posts help sellers establish a realistic price when listing their home. One is The Buyers Have Voted... by Irene Kennedy and the other is The Secret To A Fast Home Sale: Two Words..., posted by Sharon Tara.
Some time ago I heard that we need to convince three folks (or groups of folks) that the price is right. The first group is other REALTORS®. If they preview or even spot it on the multiple listing system and do not feel that it is priced correctly (in this case I am definitely meaning too high) they will avoid showing it if there are enough other homes in that price range to show.
The second would be the buyer(s). After all, they must be convinced that there is value and that the asking price is not out of sight. Before setting foot in an agent's car many of today's buyers have become well versed on what is available in their price range in the area they wish to purchase. If a listing is way too high they will be reluctant to include it when there are plenty of others that have gotten their attention.
The third opinion which is very, very important is the appraisers. Even if you were to get a contract on an over-priced home at an above market value offer, if the appraiser does not (and cannot) find comparables that have sold that justify the high price that contract will probably not fly.
Now, if you are looking at a cash purchase and the purchaser does not want an appraisal you may be in luck. However, with almost every buyer being represented by a buyer's agent what is the likelihood of that happening? I would have to say not very good. My advise to my buyer when representing them would always be to have an appraisal contingency as part of the contract even when paying cash.
The other possiblity is that the buyer has enough cash to pay the difference in the event they are getting a loan...the difference being the amount the contract is for and the amount of the appraisal. If they are not, the deal is lost or the seller has to reach some type of a compromise with the buyer which may mean coming down to the appraisal price.
These are three ways to determine the market value of a home. The third, waiting until the apprasal is completed is very iffy. Would you really want to find out at the very last minute that the house you thought you had sold may not sell? Do you want to jeopardize the plans that you have begun making based on the fact that you thought you had a sure-fire contract?
Be reasonable and responsible in your pricing. Work with a REALTOR® that you can trust. One that tells you the truth. One that is honest with you and does not tell you a price simply because it is the price you want to hear. If you do list for more than your REALTOR® can support with documentation be prepared to lower your price in a reasonable time if the response by other agents and buyers is negative.
The purpose of listing a home should be to get it sold.
That is my purpose when I list a property.
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If you or someone you know is thinking of buying or selling property at or near Lake Anna, Virginia please contact Kathleen "Kate" Elim, REALTOR®.
Contact Kate at 540-226-1964 or by e-mail at lakeanna.kate@gmail.com. Be sure to check Kate's Web site http://lakeannacountry.com/.
©Copyright Kate Elim 2011
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Kate, That is always my approach. Why let Sellers believe that they can sell at an unrealistic price? Is that helping them in any way? I am surpised at how many experienced agents take overpriced listings even in this market, but that contributes to average selling prices at 90% of asking price.
I like that three folks Kate. Sometimes the Sellers too when you have to get them to lower the price.
Those are great, Kate. The object of every Realtor should be to get the house sold, not to just list it. Listing are a dime a dozen, well priced homes sell.
Well stated Kate. How many buyer's agents are going to advise their buyers to pay cash over appraisal??
Kate -
A realtor after my own heart! Hard-nosed realities and the spine to share them with clients is what makes a good realtor.
Thanks for sharing!
At first you grabbed my attention because I have actually sold a few houses in the last 12 months three times to three different buyers before it closed! LOL
Then I read your content, and really enjoyed your insight! What a great way to break it down and make sense of the process!
Thank you for sharing!
- Harrison Painter
Kate, Wonderful post and you have a lot of important "R's" in there.....Reasonable, Responsible and REALTOR. That will get your home sold! Well said.
Kate, you are so right about the appraisal. If the agent didn't price the property right and the appraisal lands lower . . all eyes on agent. With the question "Did you price it right?"
Hi Kathleen -- Great post. Some houses are easy to comp out, others are not. Buyers drive prices up and down, and one can never exactly forecast what a home is worth to one individual buyer whom they don't even know is in the market.
Kate...
We are supposed to help sellers sell, and that means they have to accept the reality of prices in today's market. If we are not truthful, we're not being very helpful at all.
Great post, and a well deserved feature!
Kate,
I have always felt that this was true. By the time you get the buyers on paper, the seller to accept the paper, get through inspections and appraisals, and get it by the underwriter I think it is more like five times, not three.
I never thought it that way but you are right. Thanks for sharing this REAL but forgotten taken-for-granted truth.
... boy arent those 3 times truer than ever these days !!!
.... I would even add that you have to 're-sell' the buyer after the inspections many times !!!!!
Cheers Kate :o)
Sheldon
Very nice and accurate post. I really like the way you summed it up.
You can't sell an appraiser any more. No more stretching of appraisals like years ago. It is what it is.
I can't imagine listing a home and not wanting it to sell! You are right that we have to convince three different groups of interested parties what the value of a home is. In today's market we aren't seeing to many buyers who are going to pay a penny more than appraised value and with appraisals seem to be the biggest holdup in today's market.
Appraisers are the most important guys it seems these days. I think it will take a while for sellers to see this - but gone are the days when overpricing a home and it selling for that amount. Congrats on a great feature!
I have found in some situations that the sellers have ordered an appraisal before listing the house so that they can cancel out the possibility of an appraiser shooting down any offers. That way, you've already convinced the appraiser and the buyer of what the house should sell for. Letting other Realtors know is rather convincing as well.
Well said, Kate, and so many brokers do not think about the appraisal until it is too late.
Sellers who hold onto an unrealistic price run the risk of chasing the price down in a declining market. A strong listing agent can prevent that and ultimately get the home sold.
I always use the appraisal aspect when listing a home. You can't sell it to someone who is getting a mortage and putting 3.5% down when it doesn't appraise!
Very well said! Is there some kind of pill that sellers can take to enable them to see the real secret behind sales success? In this market, it is the appraisors who keep the market in check. The best way to convince a crazy seller that they are overpriced is to have a sale fail because they appraise to low.
Good post. I always tell my sellers that I don't LIST homes, I SELL them. There is a big, big difference.
Liz - well said. I think most of us (and our clients) want to sell the home, although folks don't always act that way. In this market the appraisal is particularly important, and trickier than it used to be. I amhearing more stories about problems, expecially with the changes that have taken place.
Jeff
You ARE right! Especially now the seller does not want to accept the price has dropped so much and listed the home w/yesterday's price.
Grace Keng, Silicon Valley Realtor, www.gracekeng.com
Amazing how times haven't changed even though the real estate market is ever changing. I wrote an article almost exactly like this one 2 years ago and the facts still hold true. There are 3 entities that have to believe in your pricing, no getting around that!
Kate - I was thinking back on as many deals as I could remember and I couldn't think of one time that a purchase contract was written without at least one. or all, of the contingencies of inspection, appraisal, insurance and financing. To write a contract without them ... I don't think I'd know how. LOL
Kate,
A great way to look at our job! Love your trifold approach. (And thanks for your kind link.)
One caveat, we have minted wet behund the ears appraisers like we have with Realtors. If you do want to use the appraiser as the third wheel, make sure it is an experienced and trusted appraiser. I have one in Oklahoma City when I feel unsure. I also recommend that realtors consider taking appraisal courses. It helped me early on to better understand the process.
Goo post today, thanks for the time to put it out to AR members. I agree anyone can list the house but can they sell it?
Patricia Aulson/Portsmouth NH Real Estate
Hi Kathy...When we list overpriced properties it dimishes the possibility of them selling. It's as simple as that. Often by the time they reduce it the value has dropped even more.
Kate
Kate - Nice job here! I agree that waiting for the appraisal makes it an iffy proposition.
One of the above posts says that if the apparaisal comes in too low all eyes will be on the agent who listed it too high.
Wrong.
All eyes will be on the buyers' agent who allowed their buyer to agree to pay too much.a.and risk their time and an appraisal fee in the process.
When you list too high, the seller (and you) say goodbye to all the buyers who have been looking for days or months and know their market. They see the price and move on.
There went half of all potential buyers for any listing. There also went the half of all potential showing agents -- the half who know what they are doing.
After that, you only get a chance at all the buyers who are coming into the process in coming months....and all the agents who know no better.
And soon they begin to wonder , "What's wrong with this property? Why hasn't it sold already?"
I always tell my sellers that I'm not in the business of listing homes. I'm in the business of selling them. If they want to go to a 'top agent' in the neighbourhood, who is 'top LISTING agent', they are welcome to do so. I don't suggest a list price I think they want to hear, just so that I can get the listing. I don't care if I rank at the bottom, as long as it's at the bottom of the selling agents, and not listing agents.
List realistically today, or maybe be forced to drop the price even further, down the road.
Hello Kate: I would be worried if my cash buyer did not want an appraisal. Since I work mostly with first time home buyers, this has not been my problem.....but just think if they pay more than it would have appraised they could come back and state misrepresentation on the agents part. I guess there would have to be some kind of disclaimer stating that they refused an appraisal. Kind of like the home inspection disclaimer. I guess I am showing my California litigious paranoia!!!
Kate Excellent points, but what I'm beginning to see if offering above list if there are multiple offers. They hope the seller will accept it even though it won't appraise and then be willing to sign off on the appraised price. Karen