When you’re selling a house or a piece of land, and it’s in a neighborhood in which there have been virtually ZERO sales in the past year or there have been sales that are NOTHING like the one you’re selling . . . How do you determine the price?
Some folks might think that we REALTORS are sages with crystal balls and the ability to conjure up the perfect price that will give the Seller what she WANTS and in some mystical way have some certainty that the appraiser will agree that the value is there.
More and more often, we REALTORS are facing these circumstances because most housing markets are beginning to rebound. Most markets in the US “Hit Bottom” between 2007-2010 and have been relatively lackluster until recently . . . and now the climb from the bottom has commenced.
Here in Nashville (Middle Tennessee), evidence of this climb showed up mid-2012 . . . Suddenly, REALTORS all over town were reporting on Facebook that they had suddenly become BUSY. This BUSYness carried through the holiday season (an anomaly in ANY market) and continues to show building momentum as we roll into 2013 with a record number of pending transactions and a dwindling supply of available houses.
We’re even hearing many spot reports of “Multiple Offer Firefights” . . . More than 1 buyer submitting offers simultaneously on a listing for new AND “stale” listings . . . This is uncanny.
It’s a “Perfect Storm” –
High Buyer Demand & Low Inventory create something I term an “Auction Effect” . . . PERFECT conditions for rising values/prices.
This can be exciting, exhilarating, and excruciating for everyone involved.
The excruciating part is the “agony of defeat” when a Buyer loses the bidding contest in a multiple offer scenario.
More excruciating is the happening of the winning buyer launching the loan process, clearing the Inspection hurdle, and then WHAMMO!
The appraiser shows up and spoils the brew . . . says it’s not worth what the Buyer agreed to pay and the seller agreed to accept . . . because he cannot find “Recent Comparable Sales.”
We all scramble and dig and hunt for sales that’ll justify the price, and often they just don’t exist because we are in a rising market . . . there are no recent comparable sales at this price because when the comparable sales closed, the market was at a lower point.
To some degree, the knowledge that there were multiple Buyers willing to pay the price should have some credence, right?
What about the fact that there are 12 other houses in the neighborhood that are currently under contract (but not yet closed) that are listed at a similar price? Could we poll those agents and find out when they are to close thereby creating a closed comp for us?
How about stretching our geographical parameters?
Why not do some statistician work and create a pretty spreadsheet that charts and displays (in color) the rising price as a TREND which we can extrapolate to derive “THIS price” justification?
Will the underwriter listen to our reasoning and over-ride the appraiser?
If all of the above fails and the Buyer still wants the houses . . . can the Buyer bring the balance in cash?
Not likely the seller will want to reduce the selling price because she could likely get it from a different Buyer later or with a different financial scenario than Buyer 1.
These are things that keep us REALTORS up at night.
Our ability to navigate these waters during this perfect storm definitely “separates the REAL men from the boys” or the “Amazon Women from the patsy’s”
Ain’t it FUN!
I and the Vital Few Real Estate Sales Pros at Pareto Realty think these thoughts daily as we serve our clients, and we stand poised and ready to weather the storm . . . Just connect with us – Let’s get this party started for YOU!