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What Makes A Good Agent? The Artform of Home Valuation

There are many, many aspects to being a Real Estate Agent, and we wear many hats from start to end of a Real Estate Transaction.

But in the past five years I have noticed a trend of agents who get into the business because it is lucrative, and shy away from listing property. All they want to do is find someone who wants to buy a house and then walk around opening doors like it's "The Price ir Right". They think all they have to do is wait for the buyer to say "I want THIS one" and write it up" and toss it to the transaction coordinator or escrow company.

Those who never want to put in the time and energy to value property, really value property, are in my opinion destroying the industry. Handing the consumer a stack of sold property and standing back saying "you decide what it's worth" is NOT valuing property.

Every day I meet agents who say valuing property from scratch, when there is no predetermined asking price, is too hard. Many want to simply approach the subject of price from the standpoint of negotiating, and never determine if the asking price was on target in the first place. Many don't want to be botherered if the house is not going to sell in the first week. They lose interest and hate the heartache of trying to figure out what is wrong and why it isn't selling. They want to call listing efforts "marketing" rather than work on the skills required to position a house to sell.

Standing on a mountain and screaming "Someone Come and Buy This So I Can Get Paid!" is not how you sell a house :)

Working ONLY with buyers is not an excuse to leave behind The Artform of Home Valuation. Negotiating $10,000 off an asking price that is $40,000 too high is NOT something to brag about. Every agent should spend a significant amount of time honing the skill of valuing property. And it never ends. Markets change. Value changes with changing markets.

Knowing what a house is worth, and not just what the seller will take, is paramount to being a consummate professional in the real estate industry. It IS a number's game. But the numbers are the home's true worth, not how many people you can drag to the well and make them drink. For those who want to chime in here and say "A house is worth what A buyer is willing to pay." you can...but you won't make it to my short list of true professionals.

If you think a house is worth what a buyer is willing to pay, then you may be the one holding their feet to the fire to make an offer that a seller is willing to accept. Sometimes the seller wants too much, and convincing the buyer he has to pay what the seller wants in order to get the house, is not the way "the game is played". Sure there's negotiation when you get within 3% of value or so. Home valuation is not an exact science. But you still need to know if a seller is asking way too much. If a seller is asking 20% MORE for the property than it's true worth, because that is what the seller NEEDS, getting it for 97% of asking is nothing to brag about.

Knowing how to value homes is JUST AS IMPORTANT for an agent who only works with buyers...often times...even more important.

Posted by ARDELL DellaLoggia on 07/10/2007 01:02 PM

Comments (41)

41 Comments on What Makes A Good Agent? The Artform of Home Valuation

JUL

2007

Heartfelt applause!!! I've seen too many agents that are ready to write up an offer and not put one ounce of energy into research to ensure that the buyer is getting a good value. Though in the beginning of my career I did primarily work with buyers I always had in mind the fact that someday these clients would be coming back to sell with me.

It's a longterm career for me, not just a moneymaker of the moment.

The most difficult about the selling process is convincing the buyers that the list price is right on target. Everyone wants to negotiate downward and this puts the responsibility on the agent to tell it like it is...no, to demonstrate that the price is right. And that all comes down to trusting that the Realtor has the buyer's interests at heart - not just getting a contract. Excellent post.

Chris,

I think most of us "cut our teeth" by working with buyers first. But we didn't stop at that easier way. It clearly is easier to simply bringing an offer against an asking price, than to produce that asking price in the first place.

I approach every offer from the standpoint of "If the buyer turned around and asked me to sell this place, can I get what they are offering?" I have heard TOO many agents say, if they want to sell it, I would refer it, because they don't "like to" list property.

If they don't know if they could sell it at that price, how do they know it's a fair offer price? Just my soapbox issue of the today.

Gary,

Every time I read a "Days on Market Doesn't Matter" post, I shake my head. Of course it matters. The only time you need to know if full price is a good value...is if you are making an offer on day one out the gate. And the BEST homes DO sell that way. So yes, I agree, that when it IS the right price in the first day or two, that is very important to know.

But I recently read here that someone wrote a full price offer on a property that was on the market for months BUT was undervalued...that is an oxymoron in my opinion. It might seem like it is undervalued. But if it has had no offers, then maybe the market has changed and softened. No house on market for months, with no other buyers at the table, is "worth" full price.

Of course that is not to say that a buyer can't choose to over pay. They can and do every day. If they have to have it, and they have to have it now, then often they ARE willing to pay a little more than fair market value to get it. As long as they are fully aware of what they are doing, it is not our job to tell them not to do it. It is only our job to know that they are making those choices in a fully informed manner.

ARDELL

You know you are speaking my language here! In this new market, STRONG listers will control the market.

Correctly evaluating a property and setting a proper list price is a tool in a skill set that has been lost for many years.

Kevin,

I think this is one area where technology has been part of the problem. Many new agents think that valuing a property is primarily a function that can be computerized, just as it is the hope of consumers.

ARDELL

I know agents that prepare a CMA WITHOUT even driving the 'hood--and that is not a good thing. It is mortifying and my biggest fear when I go to a listing appointment and the seller KNOWS more than I do (which rarely, if ever, happens). I think it happened once and I wanted to say...."ok so tell me why YOU need me?"

LOL,

Kevin. The post is about Buyer's Agents not knowing how to value property. I can never seem to drag you into the Buyer Agent Arena. You always enter as a seller's agent, regardless of topic.

Aren't you ever an agent for the buyer? 2/3rds of people who read blogs are buyers vs. 1/3 sellers. You need to be able to switch hats to be a blogger.

To all who may be reading this:

Do you see what I go through? This ARDELL is one tough cookie. Point taken.

May I ask a question, ARDELL? Since your market is still has some buzz to it because of your tekkies and Boeing (of late) doing well, would it be fair to say that your market/blog is being read by more buyers?

In Miami we have a lot of frustrated sellers and they contact me ALL THE TIME via the net. There is just not a lot of buyer activity ESPECIALLY IN THE SUMMER MONTHS.

Sorry to take you off topic, but would really love to hear your opinion on this.

Lvg u.

Ardell, I understand that you're approaching this from the buyer's agent position, but it works both ways. I was just speaking with one of my sellers who had their property on the market with 2 previous agents prior to me and the seller told me that the 2nd agent based their selling price on the 1st agent's analysis. OUCH! So... it goes both ways.

I wholeheartedly agree with your viewpoint.

Ardell, you're scaring me. Are you suggesting that you often see buyer agents showing overpriced properties without having done the requisite check on comps, etc? Say it ain't so. And what of the properties that ARE overpriced, yet shown? What is the listing agent thinking, offering up a rip off? With all of the tools available to come up with a reasonable estimation of market value, it sounds like laziness (and not being able to say NO to sellers that simply want too much) plays right into the hands of the less than diligent buyers agent that you speak of.

Excellent piece. Valuation is one of the key components to expertise.

Laurie,

Since our area has been steadily on an upswing, you can't use comps purely as a means of valuation. Every property sells for much more than the last one. How much more is the question and with multiple offers...sometimes irrelevant from the listing side of the fence.

From the listing side it is my job to get the price as high as the market will bear. Not a valuation based on comps. More of a supply and demand factor.

From the buyer's side of the fence, I have to value from the standpoint of where the price will fall in a softer market, or less active point in the year's cycle.

To some extent most everyone is overpaying. Question is by what degree and whether or not they understand the risk factors.

Kevin,

I only rag on you because I want to see both from you. But what I want won't matter in four days. LOL!

Brings up a good point. Many blogs have a For Sellers category and a For Buyer's category. If you put those two categories up and left For Buyers empty of posts... :)

It is one of our primary responsibilities and duties that we owe to our Buyers in diligently representing THEIR best interests to KNOW the market, and evaluate whether or not the home they wish to purchase is priced according to market value. All the more reason to know your respective market INTIMATELY, and to provide your Buyers with analysis data prior to submitting an offer that supports their offer price.

Great article,

Valuating a property correctly is so important, It does take time and experience, but it saves time-money and helps all concerned. The area that I work in South Florida has approximately 850 active listings. Probably 30% of those properties are correctly priced. I have noticed that over the years that lot agents have lost the art of valuing a property

thanks, Ardell- your market is opposite the majority of the country, and it is a dilemma (for those of us experiencing the other side)- our drop was in the 12-15% range, but the pricing was out of control when it was good. Great job, bringing this up in an "up" market- hindsight is the wrong time to give it thought, but most of us are in that frame of mind now, when it would have been beneficial to consider it then (as you are doing)...

Ardell, I like what you said in a comment above:

"If the buyer turned around and asked me to sell this place, can I get what they are offering?"

I always have that running through my mind when negotiating for a buyer. I know that they will eventually call me to sell it so I don't want to be talking up the house and price on the buy side and then be talking down the house and price on the sell side.

That's why it's probably a good thing to work with both buyers and sellers. It's a good balance to see things from both sides.

ARDELL, I see so many buyer reps in my area that can't even fill in the blanks on the contract properly. I think asking them to value a property is asking waaaaaay too much:)

Sorry, but I'm a listing broker so you won't let me play on this post. I'm going to go hang out with Kevin.

I'm with Tim, I'm always looking at a buy side from the resale perspective. As a listing agent, I adore those buyer's agents who say 'it's going to appraise, isn't it?' without doing one spot of research. Of course I do my CMAs, but sometimes we're at the very top end on price because of condition-and i'll win every time.

Ardell, I work both sides, and represent both sellers and buyers. You didn't mention the other possibility - the buyer's agent being able to properly price the property and the seller's agent being either clueless or gutless. I've often used the CMA I've prepared for my buyer to accompany a letter to the Sellers, showing why the Buyers were offering the price they did. Unfortunately, it sometimes takes a buyer's agent to show the sellers a proper price.

OH ARDELL

I would hope it would alway matter :(

Ardell,

I agree with you completely, it should be one of your top priorities as a buyers agent. If even dare mention the selling side. Inventories are way up and it's not just a flattening market. Agents have lost or never been taught the importance of getting valuation right and not taking listings that are priced out of the market.

Sellers blame us for this and the truth is they're right. If agents were willing taught to have a back bone when it comes to pricing a property right our inventory issues may subside a bit.

ARDELL

THE LAST FIVE YEARS HAVE BEEN LIKE AN INSULT TO INTELLIGENCE ,PEOPLE WERE DRIVEN BY GREED,

EVERY PIECE OF REAL ESTATE WAS A GROWING TREASURE I HAD TO STOP ONE OF MY FRIENDS A BROKER AT AN IRS AUCTION , SHE WAS BUYING A DYING HOUSE ,TERMITES EVERYWERE,BAD ROOF,DESTROYED

LANDSCAPE ,LEAKING PIPES ......AND I DON'T EVEN WANT TO TALK ABOUT THE HUGE PRICE SHE WANTED

TO PAY FOR THIS BEAUTY.

THESE HORRIBLE TIMES HAVE MADE SOME WINNERS ,MOST OF THEM BY CHANCE,AND A GREAT DEAL OF LOSERS UNLUCKY ONES

OR LIGHT MINDED OR BOTH

MY DEAR FRIENDS,READING THIS MODEST NOTE:

THIS IS WHY WE NEED TO REACQUIRE THE SENSE OF VALUE . REMEMBER YOUR BOOKS AND ALL THE DIFFERENT WAYS TO ESTABLISH THE VALUE OF SOMETHING AND NOT ONLY IN REAL ESTATE .

YOU WILL NOT FIND THE VALUE OF A PARTICULAR PIECE OF REAL ESTATE USING A MACHINE : THAT COMPUTER HAS NO BRAIN ,REMEMBER AGAIN ,THE BOOKS SAYS REAL ESTATE IS UNIQUE.

SO YOU TAKE YOUR ,CAR GO AROUND THE BLOCK ,VISIT PROPERTIES MAKE UP YOUR MIND ,THEN YOU CAN CALL THE BANK APPRAISER AND TELL HIM :MY DEAR,YOU MISSED SOMETHING.

REMEMBER 'THE CLIENT'S INTEREST IS FIRST ,HOW CAN YOU MAKE A GOOD DEAL HAPPEN IF YOU DON'T EVEN KNOW THE VALUE OF THIS PROPERTY.

THAT WAS GOOD THINKING ARDELL 'THIS EXPRESSION HOME EVALUATION IS PART OF MY EVERYDAY JOB.

LET'S GO WORK .

CLAUDE

WWW.USATAV.COM

I agree Ardell valuation is an artform. I actually did a post a while back "selling real estate is an art not a science"

As you know my market is so different than the rest of the country never having a city-wide MLS or even having accurate data on closed sales until last year. In many ways not having these tools probably made me better at valuations.

Working with both buyers and sellers it comes in handy. I often explain that I'm not an algorithm nor a bank appraiser. I explain my analysis. I use raw data, comps but coupled with variables. I take into consideration things that are subjective like views and renovations that data won't show. The buildings finances, assesments etc. If the maintenance is high but there are no ammenities than the price has to be lower than a similar apartment. Much of the knowledge comes from just being out there knowing the inventory.

Good post.

On our team we do a buyers CMA before we even write the offers. It's not that hard and in my personal opinion easier to do than sellers CMA's. In Ann Arbor we are only going back 3-6 months because the market is in such flux.

I find that this is literally the hardest part (at times) of what I do, but also the most enjoyable. I thrive on knowing this aspect better than anyone else I know and frankly, that's not saying a whole lot with the amount of Realtors we have in our local market!

I also just don't understand the whole idea of working only with buyers. Frankly, the old adage that 'listers last' wasn't invented for nothing.

"Someone Come and Buy This So I Can Get Paid!" is not how you sell a house :)

Crap I just ordered 2000 jumbo cards to be mailed out with just that saying on it.... Are you tellin' me that's NOT how i should be marketing my listings.....

<sigh> okay..... I guess I'll try it your way <wink>

Are you sure you know what you're talking about???

Kevin,

I keep telling you you have to fly out of the nest Baby!!! You will never blog in my style, nor should you. Or anyone for that matter LOL. Of course I will always follow your blog...but how I perceive the content will be irrelevant as you and I are in completely different markets.

LOVED the Madonna piece today, especially since the original reporter came to chat with you about it. Not go have a beer with Broker Bryant and talk about seller stuff. I have my hotel and flight by the way. I'm coming onthe 31st and staying until the 4th.

Tim,

I did a lot of relo work back in the 90s and I have had people turn around and ask me to sell the place within 6 months or less of when they purchased it. I was able to sell all 3 and cover the closing costs.

I was impacted by something that happened at an office meeting back in 1990 when I started. A young guy stood up to talk about his new listing. The back row of experienced agents started laughing. We all turned around and someone said, "Gloria sold that to him at the highest price EVER paid and there's no WAY he's ever going to get his money back". They were hysterical laughing.

I didn't think it was funny. There was no buyer agency back then and there. But I've never forgotten how awful it is to laugh at a consumer's problems created by lack of good representation.

None of us have crystal balls. But let's knock on wood that none of our clients calls us to sell for less than they paid, if we sold it to them in the first place. 17 years...hasn't happened yet. Usually people have made some upgraes, which helps buffer against hard times.

Claude,

Is your CAP key stuck? :)

Yes Mitchell...most of it is about keeping our eyes and ears open, all the time.

Desiree,

Hold on to those. You never know what the new marketing plans will be in 2010. I bet if you mailed them, you'd get a few calls :)

Rich,

So much of our inventory sells over the comps...still, that knowing you could turn around and sell it at the same price becomes more of an indicator than comps. That's why Days on Market are SO VERY important in an up market.

Sharon,

I can't even fathom that. Don't give me nightmares.

Knowing value is the one thing we work on all the time. Isn't it interesting that successful sellers and buyers seem to accept what the current market conditions are, and those whose homes do not sell, and those buyers who just can't seem to actually buy, don't.

This is a good post, thanks.

JUL

2007

Of course knowing comp value is key to effectively negotiating, BUT the market does drive price. Overinflated markets got that way by investors with cash, competing with each other, driving prices up, up, up beyond what any CMA would dictate.

Deborah,

In our area it was not people with cash. It was zero down subprime loans at times, and other times just normal people wanting to live closer to work. We are not as "Cash is King" as parts of CA.

JUL

2007

To properly represent and negotiate for the buyers, the buyer's agents needs to have the skill to identify a home's value.

JUL

2007

I think a lot of people really don't know how to put value to a property. When I go to show a property, I check the comps prior to going out! I won't show homes that I don't think will appraise if we put a full price offer in. It is just a waste of my clients time and the sellers are usually not willing to bring the price down $20,000 to where the comps warrant it should be.

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