A recent listing went on the market up the street from my home. As most curious homeowners do you want to learn what the asking price is to gauge where the market is headed or how that home compares to yours etc...
Well this home was priced well below market it's coming up "Short". No it is not a short sale, but it is priced like one! (Short sale = A home sold by the bank at a price below what is owed to the bank). I began to wonder if the Realtor had weeded out the short sales and REO's (Real Estate Owned or homes taken back from the bank) or other "Non arms length transactions in determining the "Asking price". Although these sales should be taken into account they typically should not be used to determine the asking price unless they are the predominant sales transaction in your market
In other words, you should not lump these sales in on your CMA's, they will skew the numbers unintentionally and you and your clients will be taking it in the shorts.
As an informed seller, one of the questions you should ask your Realtor is: "Mr/Mrs Realtor when you were determining an asking price (CMA) for my home. In your analysis did you weed out these types of transactions?"
I personally experienced this when I refinanced my home recently. The Appraisal came in low, I asked for a copy of the report and found the following:
Mistake #1 the lender used an Appraiser unfamiliar with our market, he was based an hour and a half away.
Mistake #2 he used a sale on the same street that was a below market sale and hung his hat on it, because it was the closest to my home. This is a good practice in normal circumstances but what the appraiser failed to recognize was that it was "Truly" a distress sale and the owner had to sell it at a fire sale price. Two of the sales he used were REO's One of them was a home I had recently Appraised myself. I knew everything about it.
I know what your saying "Well he's an Appraiser of course he knows this, but I (Homeowner) am not, how could I possibly know what is an REO sale or not? Here is one way to determine this, look up the home and find out who the seller is? In most cases it will be a bank that is named as the seller.
Mistake #3 county records in our area have many inaccurate lot areas posted in the property information . When you match up this information with the plat maps (Plat maps = Lot dimensions and where it is located) there are huge lot area differences. He was comparing homes with half the lot areas as mine. I pointed out all of these discrepancies and rebutted the report. The lender sent out another appraiser and came back with a market value estimate which was notably higher.
My point is this, have you made changes to adjust to the changes in the market?. Are you doing your homework when your during your CMA's. If your not, your not only doing a disservice to your client, but you are negatively impacting your own market and livelihood.
I know most (Realtors/Appraisers ) do this as part of their analysis. I suspect this new listing may have not. You as an informed homeowner armed with this knowledge/information should not lose your shorts when listing your home.
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