The Perils of Pricing Your Property Too High

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If you really want to get your property sold in a timely manner and at the best price the market will bear, most Realtors©, including myself, will show you a CMA report (a Comparative Market Analysis) sometime during the Listing Presentation. It is important to look at the “comps” (comparable properties to your property) for a number of reasons. In fact, sometimes I will even drive my clients around to comps in the area, so they can that they see firsthand for themselves what the homes in their area are selling for, or at least, what their list price is. We can see how long they’ve been on the market, and track when they go into escrow and are sold.

Lenders Require Appraisals

The number one reason that sellers need to be aware of the comps is because Appraisers depend on sold comps (comps that have sold within the last 3 – 6 months for their appraisals). Many buyers need or want to use a loan in order to purchase a property. Lenders require an appraisal. The Appraiser looks at the subject house and does a detailed analysis using the comps, adjusting for various factors. Does the house have a pool or not? Has it been remodeled recently or not? What is the size of the house compared to the comps? What is the size of the lot compared to the comps? Does it have amazing views or not? Is it on a busy street or not? All these factors play into the appraisal.

It can be trickier for an appraiser in areas that are not “cookie-cutter”, where the homes are all very unique, many built in varying years, many original vs. remodeled vs. recently remodeled. Some may have 2 or 3 or 4 or even 5 bedrooms, and a varying number of bathrooms. The architectural styles vary. Views vary. The factors that can make a difference are many! One thing sellers and listing agents should request from lenders to help get a more accurate appraisal is for the appraiser to be a reputable local appraiser, who is more familiar with the market here in the desert.

What Happens When The Home Doesn’t Appraise?

Many people assume that appraisals “magically” come in at the purchase agreement price. This happened often in the heyday of booming real estate prices in the years 2000 to 2006 but then home prices started falling and they really fell after the financial crash in September, 2008. They didn’t start climbing back up until about 2012. Even since that crash, lending practices and regulations were changed dramatically. Appraisers were selected using different criteria, and gone were the days that sellers could count on their properties appraising.

Today, one still cannot assume that the appraisal will come in at the price in the Residential Purchase Agreement.

If you price your home according to sold comps, real comps, then the likelihood of the property appraising greatly increases, and there is less stress involved.

If you have priced your house with a pie-in-the-sky price, in spite of the comps the Realtor has dutifully showed you, then there is a high likelihood that your house will NOT appraise.

What happens when this unpleasant “surprise” rears its ugly head? There are a variety of possible outcomes.

In the Worse Case Scenario

The worst case scenario is that the deal will fall out of escrow if either party is unwilling to renegotiate the price. However, typically, when there is a serious seller and serious buyer involved, then the purchase price is re-negotiated.

The Best Case Scenario for Sellers

In a case where there are multiple offers, this situation can favor the seller, because the buyer may want the house so badly, that the buyer will fill the entire gap between the purchase price and the appraisal, even if it’s $100,000 or more! It can happen!

However, multiple offer situations are not often the case here in the desert, where secondary homes are common and there is a fair amount of inventory.

The Common Scenario: Try for a Win-Win

More often then not, the seller will have to come down in their price, and the buyer will have to come up in the price, in order to complete the sale. The split can be successfully negotiated in many cases with guidance from your experienced Realtors©. It is generally wise to ask for advice from your Realtor© to weigh your options carefully and successfully navigate the transaction.

The Best Case Scenario for Buyers

If the buyer is NOT in a position to come up on the price, because they have an FHA loan, and they do simply do not have the funds to cover any of the gap between the purchase agreement price and the appraisal, the seller sometimes will opt to cover the entire gap. Another reason for this, is that an FHA appraisal stays WITH the property for six months, so if another FHA buyer comes along to make an offer, if the original offer falls out of escrow, that FHA appraisal will still be in force. So if the seller is serious in selling, during that time frame, they have little choice but to come down in their price.

This is also true of a buyer who is only willing to pay the appraised price, and the seller just wants to sell quickly and agrees to sell their property at the appraised price.

Needless to say, this situation generally increases the stress level for all parties involved.

Ground Hog Day or Make That Price Adjustment?

If the seller fails to lower their price to “fair market value” after a deal falls out of escrow due to a low appraisal, they may find themselves facing a Ground Hog Day kind of experience… a deja vu experience. Why not just price it right for the market and cut the stress level for yourselves?

Yes, some people do get lucky, and get that out-of-town buyer with cash to burn, and is able to make an all cash offer, who falls in love with your house and simply impulsively makes an offer that is close to or matches your pie-in-the-sky list price! In that case, you had better seek to have a quick escrow, say close escrow in 10 days, before they change their minds!

Perhaps you yourself were that out-of-towner who made that impulse buy on the property years ago, and so you think that it will happen again. It very well could happen again, but I would not count on that. It does happen, but not very often. Say it’s been sitting on the market for almost six months now, and a buyer wants to buy it for “fair market value”. The worst case scenario, is that you have enjoyed the home for several years, and if you decide to sell it for the “fair market value” price that the buyer offers, you might even have to report a loss after all the closing costs. Look at the bright side! Then you won’t have any taxes to pay! In the meantime, if you paid all cash, you will get that cash back to invest in something else that you might want to. If you are Canadian, then there is the benefit of the better exchange rate from US dollars to Canadian dollars.

Bottom Line Is…

The bottom line is that it makes more sense to price your property according to the comps, and maybe a bit higher is the market prices are drifting higher. If you price it right, you may even get a bidding war going and get over the asking price! Realtors© want to list but even more than that sell your property. Realtors© are different from “real estate agents” because being a Realtor© requires that we take an Ethnics continuing education course every two years, and we are members of the California Association of Realtors© and the National Association of Realtors©, which has strict guidelines.

You will find that most Realtors© are very risk-adverse, and want to be as honest as possible with their clients. Therefore, when you pick someone to sell your property, choose a Realtor©, who belongs to the local board of real estate, and participates in the local MLS. When a local Realtor© gives you the comps for your property from the local MLS, you can generally trust them to be telling the truth. You can always trust me to provide you with the most accurate, up-to-date information regarding your property’s value, from the comps on the local MLS and then from the feedback I receive at the open houses when you list with me.

When You List With Me…

When you list with me, I will hold open houses almost every weekend until sold, and I will be hearing feedback from people who are either lookyloos, interested neighbors, agents and even serious buyers, many of whom provide valuable feedback, on the appearance of the home and the price, which I then share with my sellers. If the list price needs to be adjusted, we should know after about a month’s time of having open houses and the home being listed on the MLS. Sellers are better off when they listen to the advice of their Realtor©, as we have the knowledge and we are more than willing to share it. This is one of the ways we earn our commission: to provide sage advise based on experience in order to help facilitate a successful transaction.

I hope this article is helpful to you, and I invite you to contact me on my cell at 760-587-6009 if you have any questions or would like to schedule a listing appointment.

Wendy Campbell All Rights Reserved © October 2018

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Furniture: LEAVE IT or NOT TO LEAVE IT? That is The Question!

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OntFireplc

In the desert, a popular resort area, many homes are secondary homes, and so sellers often do not need the furniture for their primary home or another secondary home.  That is why many sellers opt to include their furniture with the sale of their house. The furniture is worth more WITH the house, rather than if sold separately from the house.  It also helps to sell the house for best value and more quickly.

Many buyers of secondary homes will be more attracted to a home if it is tastefully furnished with lightly used furniture, and, better yet, if it is offered turn key furnished with all the kitchen utensils, etc. In other words, the motto “Just bring your toothbrush!” is very appealing idea to a buyer of a second home or even primary home. This will often give your property an advantage to sell more quickly.  So you might as well take advantage of it if this is an option for you!

If you try to sell your furniture in a yard sale, or using an on-line service like craigslist or OfferUp, even if it is very high end furniture or rare antiques, you will get likely get pennies on the dollar and it will be time-consuming as well.

If you sell your furniture using a consignment store, they will only select some items that they are interested in selling in their store, and they will take a consignment fee of at least 38% of whatever they sell it for. This can be a good option if you have a lot of high-end furniture in good condition. They can come and pick it up if there are enough items.

Items that you can’t sell easily or quickly or are of insignificant value, you can always donate to a local thrift store like the Angel View Thrift Stores for charity throughout the valley, who can pick up your items and give you a form to complete which you can use as a tax deduction.

Items that you want to keep, you obviously have the option to arrange that a reputable moving company pick them up and move them to wherever you want.

Some people think that a realtor just wants to make more commission by including the furniture with the sale of the home, however, considering the furniture is generally worth $5000 to $20,000, that is very negligible, and not the goal of the realtor. The goal of a realtor is not just to list your home, but to get it SOLD at the best price the market will bear in a timely manner.

Sometimes buyers don’t want any items or they want just a few items, and in that case it actually is an inconvenience for many sellers to arrange to remove the items.

Bottom line is, the goal is to sell the property at the best price that the market will bear and in a timely manner. If a buyer makes a good offer on the home and wants the furniture to be included with the sale of the home, then it is advisable to agree to that. If they are using a lending institution, then it will be stated on a separate Addendum that the furniture is sold at zero value with the sale of the home, because lenders do not lend on furniture.

Every situation is different however the above is a guideline for standard practice here in the desert. Unless you have a special attachment to your furniture and can use it elsewhere, it generally has more value if sold with the house. If you have any questions about this, please let me know! I can be reached at 1-760-587-6009 or you may e-mail me at wendysdesert@gmail.com.

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© All rights reserved by Wendy Campbell 2018