Special offer

Justifying Your Low Offer? Price Per Square Foot CMA’s Are Misleading

Reblogger
Real Estate Broker/Owner with PMI. Destin

Great post, worth reading again. Experience does matter. 

Original content by Wendy Rulnick

home appraisals

Recently, I received three offers on Destin Florida area real estate listings that were quite low. In each case, the buyer’s agent attached a comparative market analysis, called a CMA. The only problem was that these so-called analyses only used “price per square foot” as a value determinant. The agents chose nearby homes, plugging their sales prices into an online program, and spat out the results of average price per square foot, multiplying that figure by the square footage of my listing, thus “justifying” their buyers’ low offers….  One agent stated the buyers were afraid of paying any more, as they felt the property would not appraise. Correction – he misled the buyer into thinking that is the only way homes are valued.  That is just plain wrong.

Home valuations are more than just plugging in price per square foot, just ask any appraiser (and I did!).  Here are other factors that are considered when appraising real estate:

1. Land Value: Is the lot flat, built into a cliff, larger, smaller, wet, backed up to commercial property, adjacent to state forest, a highway, near a land dump, on a cul-de-sac, on a lake, with a water view, etc. By the way, if it has a water view (or mountain view or any cityscape view) how does the view corridor compare with others?

2. Concessions: Did comparable sales include seller credits such as furniture, cars, boats, free rental time, closing costs, etc.?

3. Quality: Are the building and finishes superior or inferior? Are amenities superior or inferior? Are there quartz counters, upgraded baths, tile or carpet floors, paneling, popcorn ceilings?

4. Condition:  Does the comparable or subject home need work?  Here is another example: A home built 20 years ago that was gutted and remodeled may be worth more than a ten year old home with no improvements and poor maintenance.

5. Age/Number of Baths/Garage/Parking

6. Amenities: What are the adjustments for porches, decks, fences, pools, irrigation systems, patios, fireplaces, docks, boat slips, etc. If one property has the same amenity, is it equal to the subject property? Reference quality and condition.

I tried to gently explain this to one of the buyer’s agents. He didn’t understand and another agent wrote an offer that was significantly higher. The original agent wrote an offer for $150 per square foot, based on the plug-in computer program he used.  The couple that entered into contract paid $170 per square foot, and paid about 10% more than the original agent contended the home was worth. It was a flawed analysis, it misled the buyer and they lost a home.

By the way, the house appraised.

It’s Wendy… It’s Sold!

"It's Wendy... It's Sold!"

Wendy Rulnick, Broker/Owner Rulnick Realty, Inc.

Call Wendy Rulnick 1-850-650-7883 ext 204

email itswendy@rulnickrealty.com

www.rulnickrealty.com property searches and community info

 

Wendy Rulnick is the marketing choice for sellers on the Emerald Coast who want to list and get their homes and condos sold in Destin, Sandestin, Bluewater Bay, Santa Rosa Beach, 30-A, Watercolor, Seaside, Rosemary Beach, Seacrest Beach, Kelly Plantation, Regatta Bay, Destiny and more.

Rulnick Realty

 

Comments (8)

Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

You can have all the square feet you want...without updates...don't look for a sold sign in this market....unless it is priced for condition.

Feb 22, 2017 01:46 AM
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Peter - Hi! Thank you for re-posting my article!

Feb 22, 2017 05:22 AM
Nathan Gesner
American West Realty and Management - Cody, WY
Broker / Property Manager

Price per sq.ft. is just one of many methods. It's important to understand each and know which one to use at any given time. Good reblog!

Feb 22, 2017 05:36 AM
Sandy Padula & Norm Padula, JD, GRI
HomeSmart Realty West & Florida Realty Investments - , CA
Presence, Persistence & Perseverance

Peter Mohylsky This post is a great choice for a re-blog. We have been having to depart from the $/SF calculations more and more this year.

Feb 22, 2017 06:42 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Square footage has never been the only way to calculate value. Condition and competition have so much influence.

Feb 22, 2017 07:28 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Prop. Mgr, Wenatchee, WA

Excellent reblog Peter.  Wow... I would have been shocked if one agent used only square footage as a pricing factor... but all three?  That's downright unbelievable.  Who is teaching these people?

Feb 22, 2017 07:51 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Peter what a great re-blog and thank you for introducing me to Wendy Rulnick  nice to see experience shared:)Endre

Feb 27, 2017 11:18 PM
Wendy Rulnick

Thank you, Endre!

Feb 28, 2017 06:10 AM
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Good morning Peter.  Excellent re-blog with some important information that both buyers and their Realtors should understand.

Feb 28, 2017 05:14 AM