After several years of a lot of the same . . . Relatively balanced market . . . REALTORS and home sellers could rely on “Historic Data” to determine how much to ask for a house.
It was a mathematical computation based almost entirely on the closed data of similar properties within a close geographic radius in a 6-12 month window.
This “CMA” based valuation has served us all very well through the years, but we hit a snag @ 5 years ago . . . The market crashed.
Suddenly, everything we thought we knew about valuation changed . . . and continues to change as the market shifts along from one trend to the next in a largely unpredictable way.
This has been quite a “Wild Wild West” experience for those of us who have been selling real estate for 15 years or longer . . . and even MORE wild for those who are seeing this for the first time.
Why so wild?
Well, Historical data isn’t much more than “information” for us now. If we REALTORS were to rely solely on that (and home sellers were to play along with us), our market wouldn’t recover . . . and without recovery of real estate values (recapture of lost equity), sellers would not sell . . . and Buyers would lack motivation because they wouldn’t have the “resistance/friction” that comes with the prospect of rising prices.
So . . . to a certain degree, pricing a house now is more of an art form.
We have a dance between the Historical Data perspective and the current supply and demand jig. As supply shrinks (Which has happened in Middle Tennessee) Demand increases as Buyers realize their choices are fewer and consequently see the buying power of their dollars decrease.
They want to buy NOW because the values are still very palatable, yet the inventory is not there for them . . . and so many of them panic.
This gives rise to multiple offers, escalation clauses, and sometimes Buyers willing to pay more than appraisers are willing to justify.
I’ve seen this play out in myriad ways in the past 3 months . . . yes, 3 months . . .
In one case, a seller had refinanced 4 months before a sudden job relocation necessitated a move. They were concerned because they had to struggle to get a $400,000 value . . . I studied the comps from 6 months back to present and came to the same conclusion . . . and then took a look at the “months of available inventory” for the immediate neighborhood and saw that it was approaching zero . . . so I recommended a list price of $425,000 . . . We had 2 offers within 5 days of listing resulting in a full price sale.
Some folks would say that we’re crazy and that it would never appraise . . . but in the span of the 45 days we were under contract, the comps showed up with new closings.
When it’s fluid, it’s fluid . . . and we must now pay more attention to understanding the trends of Supply and Demand than the simple math.
In another case . . . My estimation of value in the market was a full 20% more than the Seller thought they might get based on the “zestimate” of their house value . . . Good news for them . . . I encouraged them to try my price . . . We were under contract in 3 days and had no issues with appraisal.
None of this is to say that we can all just pull prices out of thin air . . . It IS possible to over-price . . . we must learn this new dance.
Enter now the era of elated Sellers and frustrated Buyers.
and the cycle continues.
thus one of the many reasons I love this business.
When you’re ready to make a move in or near Middle Tennessee, connect with me or one of our “Vital Few” Pareto Realty Real Estate Sales Professionals and ask us about supply and demand in YOUR neighborhood, and how that might play into the value of your house.
I think you’ll like what you hear.