I'm not trying to split hairs, but I have a problem with the agent who authors a newspaper column in the community where one of my offices is located, based on the premise that he is best qualified to counsel area property owners about what their home is "worth".
Professing to know the answer to "What's it worth?" in a particular community may make a great headline for a newspaper column, but it could be considered puffery. Once you have made the blanket suggestion to readers that you are some sort of clairvoyant expert on what property in the community is worth, you may be called upon to prove your claim.
Real estate professionals research and assemble a CMA (Comparative Market Analysis) before we tell a seller what we believe their property will bring on the market. That Market Analysis takes into account recent sales, pending sales and also comparable properties currently on the market. The same Market Analysis tells us what likely price a seller may reasonably expect to receive. Without having first prepared a CMA on a property, what have you got to base your opinions on?
Do a Market Analysis on a property first and then you can begin to tell a seller you have the answer to the question "What's it worth?"
Better yet, bring a buyer to the table at 100% of the listed price, or even close to full price. SELL SOMETHING! Close a few transactions at close to list pricee and I'll be far more inclined to recognize your professed expertise.
- Remember, even a Market Analysis is a moving target. It's a snapshot estimate of current value and it's only good for a limited period of time.
- Even a Market Analysis is not "What it's worth". A Market Analysis is a guideline, not a guarantee.
Determining present value is pretty difficult in a community (like ours) where there is a dearth of recent comparable sales. Without comparable sales on record, there's little likelihood that the property will actually appraise high enough to qualify for a mortgage. And if even a local appraiser is reluctant to come up with a value figure without recent comp sales to support it, what qualifies a real estate salesperson to boldly imply in print that he or she has the answer to the question "What's it worth?"
If an agent's own listings are sitting idly on the market, what qualifies that individual as an authority on what things are worth in the community?
NO COMPS = NO WAY THE PROPERTY WILL APPRAISE = NO MORTGAGE = NO CLOSED SALE
And so the cycle continues. If we can't make home sales, we wind up with..you guessed it, NO COMPS. That takes us back to square one.
We have more than our share of overpriced listings in the north country. Some of our sellers deserve to be told what they NEED to hear instead of what they WANT to hear about their home's value.
Right now, there are half a dozen Lake Superior waterfront homes for sale in our area, all priced in the fairly narrow price range between $525,000 and $650,000. I'd refer to this as a bubble, but maybe it would more accurately be called a logjam. NOT ALL OF THESE LISTINGS ARE OVERPRICED, but some are.
And so far this season, nothing is moving in that price bracket. If we reach the end of the year without any movement in this price bracket, listing agents will be left with plenty of disillusioned clients and loads of unsold inventory. How does that serve these sellers?
It takes courage, patience and logic to deliver the message that a seller's home is overpriced. You also need to know your market.
So what's a seller's property really worth?
- Let's just say that a property will sell for what a capable and qualified buyer will be willing (and able) to pay for it. Being able to pay that price may just mean having the ability to obtain a mortgage loan in order to buy. There are more factors involved in determining what a property is actually worth than most sellers (and some agents) may realize.
- Let's begin to understand that some list prices in some areas may need to come down further in order for home sales to get moving again.
- Let's counsel our sellers that mortgage lending will likely have to improve before we see liquidity in housing in our area. Not all sellers can afford to sell under a land contract. Not all buyers can afford to pay cash. And how many buyers have half a million in cash burning a hole in their pocket?
- Let's tell sellers that we would be glad to do a Market Analysis of their property and we will base our value opinions on that analysis. Until we have that Market Analysis in hand, we don't have an accurate picture of the market that entitles us to declare what a property is worth, do we?
- Let's remind sellers that our area real estate market is affected by what's going on in the real world. Your property may be located on an Island, but that Island is still part of the United States, still part of the State of Wisconsin. The same market forces we see across the nation and the same resulting effects on appraisals and mortgages will continue to impact upon prices and values in this community.
A FINAL NOTE ON THE SUBJECT - When one of our area agents can demonstrate a pattern of repeatedly procuring buyers and closing sales over 95% of list price (or even closed sales in excess of 90% of a property's list price), then I will begin to believe that person is an authority on what property is "worth" in our community. Until that happens, I remain skeptical.
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