Real Estate Blog - So, really, "What IS the PRICE of the property?" Agents need to consider their answer!

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So, really, "What IS the PRICE of the property?" Agents need to consider their answer!

So, really, "What IS the PRICE of the property?" Agents need to consider their answer!

I had an agent ask me this question the other day. She said, "Do we really even know what "price" is anymore? GREAT QUESTION from HER, and GREAT QUESTION for YOU as PEERS!

What's in the "price", by "price" I am relating this to the listed price on the MLS. Is it the price that is confirmed on an REO that has very little "wiggle room" or is it the "short sale listed price in an unapproved short sale?" waiting for that first offer to get things started. Is it the sale price listed in a normal sale where it is priced correctly in this market? Or, is it inflated/deflated?

How do you set your prices?

Most important to me is: "HOW ARE YOU DOING A CMA?" Are you using foreclosures? Or are you using normal type sales numbers? What IS the price?

How are you determining the suggest PRICE at a listing appointment? How do you justify what the sales price should reflect?

At this time and in this market, it's hard to determine. You might have a gorgeous well maintained home across the street from one who was damaged 4 years ago with mold, roof leaks, pool no longer holding water. How do you deal with these issues? What do you advise your customers, how do you make them understand the "PRICE"?

This has become a HUGE ISSUE for those of us who list as well an sell in the current market.

I would appreciate your constructive comments here as on occasion...these issues arise.

We can all help each other by suggesting methods of dealing with situations as above as I know everyone has to deal with this at this time and in this market.

Thank you for me and our peers!

http://www.KarenMonsour.com, 954-464-4194

Posted by Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! on 09/09/2009 10:37 PM

Comments (37)

Pricing Your Home in Todays Market in the ActiveRain Channel

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37 Comments on So, really, "What IS the PRICE of the property?" Agents need to consider their answer!

SEP

Karen: Very good question.... if this is a REO or a short sale, you really don't knwo what price they will accept until the offer is presented. Will park for more answers

Roland,

Thank you so much for your input. I agree, this is such a difficult time to really determine the true price. I'm parking with you as I would love many opinions on this difficult situation in this difficult time.

SEP

We're playing Russian Roulette with pricing. Spin the barrel and pull the trigger. Do we differentiate PRICE from VALUE? Value is personal - what will a particular person pay at this time? Price is arbitrary - pin the tail on the donkey.

Pat,

You are so correct with your response ( and thank you for posting ), This is just a strange place in time and the buyers and sellers are as as confused as we are with how to do an appropriate CMA for them. Do you use foreclosure prices when you are doing a CMA for a buyer who is not in distress?

Seems to me like this is the perfect market for range pricing-- short sale sellers seem fine with this-- anyone have any banks object?

Barb,

This is a difficult market to give a BPO or a CMA to anyone, that is why I wrote this post...to see an listen to other's who may have advice here. Thanks for your comments.

Karen, I was going to ask a similar question but you beat me to it. Tonight I went into a neighborhood to list a short sale property. In the last 6 months there were 13 resales that were short sales or foreclosures. Only 1 resale that had was not. The builder is still building in this neighborhood in the 110,000 range. The short sales and foreclosures were all 66-80,000. That's a drastic drop. The lone resale that was not either sold for 91,000. Still a far cry from what the owner's had paid 3 years ago. My client paid 112,000 3 years ago and we listed it tonight for 89,900. It's a crazy market out there.

Maybe I picked the wrong week to give up drinking, but I don't understand the question. ;)

I have no issues determining value, whether it is a short sale, REO or a retail listing. I don't think anyone can give a specific formula as it will require a lot of local factors. For example, you asked if you use REOs in your comps. The answer will depend if REOs are a major percentage of the market or not. You will also need to determine local market trends. So there is no simple formula.

This is a tough one-- you explain it to a buyer , the issues of REOs and short sales and often times they are scratching their heads.

Carol - That's easy. You list it at 110k and drop it 10k every 10 days (if time permits). After 30-40 days, you should get an offer. If you are in a declining market, you counter the offer to 55k (or 20% below the lowest comp), in a stable market you counter the offer at 65k and in an upward market you counter at 75k if the lender is slow and if it is fast, then 65k. You then intercept the BPO and show him/her the low comps in the 60k area. Short sale should be a success and the buyer should have some equity in the deal to stick around and pay your lowered commissions.

Good question Karen. In terms of should REOs be included in CMAs - remember that appraisers typically do. And unless you are dealing with cash offers, the appraisable value is important when you buyer is looking for a loan. Especially with the new HVCC, this is important. We have seen bidding wars on some REO properties here in Tucson, where the final contract price is significantly above the original asking price. Great for the bank in theory, until the buyer can't get financing because the appraisal doesn't support the higher price.

I have heard of some loan officer's getting upset when appraisers use REO comps and it brings down value. But of course, in getting an appraisal the lender wants to know the value of their collateral if they have to forclose on the home - at which point it would be an REO. I look at it in terms of - if I was lending my own money, would I want REOs included in the appraisal - and the answer is yes everytime.

Just my two cents from a lender perspective.

Karen, in my market I look at what is active and sold, but am now placing more weight on the competition. If my price won't get them in the door then it is not competitive. Yes we look at Short Sales and forclosures as the appraisers will in the appraisal.

I tell folks that the List Price is a place holder that the Listing Agent MUST enter to post the listing on the MLS.

The ACTUAL price is a figure agreed on with acceptable terms between two parties. It may be list, and it may be less or more.

I work a different area of Austin than Carol above and do not see all that many short sales. I mostly try and use SOLD comps from the last 3-4 months but lately have leaned toward the competition if those numbers are lower. Though flat is most of my areas, the upper price ranges $800K+ and even more in the 1.2mil+ range have very large inventories and a very high absorption rate. I am just glad we are not going through the same dilemma that is occurring in many parts of the country!

Karen... as much as I love the question... many of the answers in my opinion will be the same. "It's a tough market out there".. oh really? Seriously though... it is a great question, because I have had debates in two different blogs of mine, and it's amazing on some of the answers. I would love to throw this question into the mix of things. "If I find a house that I really wanted, I have been shopping for 5 months now.. I have plans and goals. The property is worth $300,000. I can settle on this house in the next month. The realtor said that it should appraise for $300,000.

Now, the appraisal comes back at $295,000. But the buyer still wants to buy the property. Some people are arguing that they should not spend more than it appraised for, even though the buyer wants to.

I just had to add this in there... because I think it goes to what you are saying, how do you list homes? Get values? I am a loan officer, so I won't answer that part. But I would like to hear other realtors and how they feel about this. I do think Mike's comment, #13, is very valid... thanks

jeff belonger

As you suggest the right way to assist a buyer when deciding how much to offer for a property is to prepare a cma. Your question: do you include reo properties in that cma? is easy in my market, (SW Florida)...of course you use a cma. 65 % of our sales are reo properties and of the rest, about half are short sales. Overall about 65% of our total sales are cash buyers. Reos are the market and if you dont include them you wont find market value.

Its a real problem for buyers that need financing, If they offer market value, the cash buyers will be favored by the sellers, and if they offer more than market than the appraisal wont support the loan.

Price is determined by this formula

BP: buyers perception

aided by an

A: appraisal and a

SA: sellers acceptance

equals

TP : True Price

BP + A + SA = TP

Ah Karen, I can only tell you about my market area and I put very little weight on a CMA. I use recent sold data but put a lot of emphasis on the current competition and the recently pendings and their history...the fact that they have actually gone under contract tells me alot about how well they were priced. I try to determine my sellers goals and then make my recommendations based on those. If they are looking for a quick close so they can move on to an area that is more affected than ours the answer may be different from someone who is looking to stay in the area. I give them choices and tell them the consequences of each pricing decision and let them decide...the only thing NOT offered is "lets just TRY it at a crazy price and SEE what happens." I have a business to run and that is NOT working for my client!

When it comes to understanding how other agents have priced a home I am trying to sell to my buyer, I may well ask them to "help me understand how you arrived at that price" and then shut up. You'd be amazed what I learn! Good luck!

I price listings based on the surrounding competition currently for sale. Doesn't matter if it's an REO or short sale, it's still the same house in the same neighborhood.

At the end of the day, isn't a house still only "worth" what someone will pay for it? This concept works for any type of market.

It is a very difficult thing to do. I recently did a set of BPOs on some foreclosed condo units... the company that ordered them did not like my comps. The units I was doing were not finished and the client wanted me to use "like" comps. I had more than a little difficulty explaining to her that we didn't just have masses of unfished condos selling in our area. She did a little on line research and then accepted my comps. But what a pain.

It seems to me that price ranging (which is the way you do it in Florida) would be the way to go, but our MLS up here will not allow us to imput a price range...it only allows us to input a specific price...which is why too many listing agents overreach on the price, and then have to talk sellers into lowering it as the months go by. I personally would prefer to do the price range option, but I'm not moving to Florida, so I guess I'm stuck, huh?

My real estate life is so much easier in a market like oklahoma City. prices have not dropped in two years, only 4% of MLS sales are distressed, and we have slight appreciation. Your market would drive me crazy. I saw where property tax rates were going up in Broward probably. That will help your values drop.

We don't have that many foreclosures, but I do think you must take into account short sales/foreclosures and the prices buyers paid for them in your cma. That is the reality of the market right now.

I think it all has to be considered.

Carol,

You are right, it is crazy, you never know how to value a home in this market...especially when the appraisers are using the foreclosures in their valuation of a property.

Amiri,

Yes, this is difficult...it does depend on the market you are in...

Bob and Carolin,

I'm scratching my head at times as well.

Amiri,

And you find people willing to do that where?

Simon Smart,

Yes, you are correct, it does depend on the market you are in.

HI Missy,

Thank you so much for your input!

Simon Smart,

Yes, you are correct, it does depend on the market you are in.

HI Missy,

Thank you so much for your input!

Mike,

That is a great answer to a difficult question. Thank you for your input, I will keep that advice in mind.

Russell,

All I can say is that I'm glad you are not having these issues.

Jeff,

Yes, as above, I like Mikes answer as well.

Ron,

From what I am seeing, the cash buyers are ruling this market!

Fernando,

I wish it was that easy...

Sarah,

Please share some of the information that you have learned...I know, when a question is asked, the first to answer usually is the one who lost - a deal or two.

Andrew,

Yes, you are right, it is in the eye of the beholder...only if they are cash buyers and don't have to rely on anyone elses opinion.

Tammy,

That would be a tough one for anyone.

William,

We have to put in a specific price as well, not a range. Our market/office on the beach is doing pretty well right now.

There is not so much of a price reduction on the beach as there is on the west side of town.

JOE,

You are totally wrong about property taxes, everyone is so happy that they have dropped...actually on the average in my area of south east Fort Lauderdale by about 15%.

It works great in California as our sellers could care less what the property sells for as we are a non-deficiency state.

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