One of the biggest mistakes a seller can make is to implicitly rely on the proposed price a real estate agent or professional valuer provides you.
That might sound like a strange thing for me to say given I’m obviously a real estate agent, but the truth is that any professional can only estimate what a property will sell for.
Quite often, property owners will form an opinion about what their home is worth, and this can be a dangerous assumption to make.
The old saying goes…
“A home is only worth what someone is prepared to pay for it” and whilst I think that this statement is partially true, I do believe a better statement should be…
“A home is only worth what someone is prepared to pay for it but what they pay can be influenced by an agent that can effectively negotiate”.
I’m a big believer that the market value of any property can fluctuate to a certain degree.
A buyer will pay a price a figure for a property based on comparisons of what else they can buy for similar money…and this can be influenced in an instant.
Let me explain…
Right now, we’re about to list a home for sale at a price that will be “Offers above $619,000” and before we’ve even had photos taken, we have identified a buyer on our database that we thought could be interested in this particular property.
We’ve taken them through for an inspection and the buyers made an offer on the spot of $620,000 – a good result for the sellers as they were about to professionally stage the home with furniture and this would have saved them several thousand dollars as well as the cost of any marketing etc.
The owners were deliberating on whether they should take the offer but before we could even obtain the offer in writing, the buyers saw another home come online that had a few more features than our property…and was priced at “Offers above $579,000”.
Based on this listing, our buyers (who still preferred property for a few different reasons) reduced their offer to $585,000…a figure that was clearly not going to be accepted.
So, the summary here is that the perceived value of our home was affected by more than 5% based purely on another home that has been listed for sale…despite our bests efforts to convince these buyers to re-instate their original offer.
I’m always fascinated when buyers and sellers form an opinion of price that has such a definite figure and such a narrow margin.
It’s fair enough if a buyer is at their limit but I’ve had a number of discussions with buyers recently where they are so precise about their analysis that they can end up losing a property for such a small amount of money when considering the bigger picture.
An example of this is where I was recently negotiating a sale and the buyer said to me…
“Michael…I’m comfortable paying $735,000 and believe that this is a fair figure but there’s no way in the world that this home is worth $740,000”.
When I broke it down to them that they are really saying to me “Michael…we believe that this home is definitely worth 99.3% of the asking price but there’s no way that it is worth an extra 0.7 of 1%, then the outcome is trivial and often the difference is simply one party that has a need to have a little win.
I find that the only way to work with buyers that form such a rigid view of the market is to take them back to fundamentals of property and work to expand their belief systems.
Value is truly in the eye of the beholder and I often equate a negotiation like this to eating in a restaurant and asking a friend…
“What would you give this main meal out of ten if you were to give it a mark?”
Let’s say they answer “I’d give it a 9 out of 10” then your argument would be similar to saying…
“I believe that this meal should be scored at 8.93 out of 10 but there’s no way that this meal is a 9 out of 10.”
Sometimes breaking it down to the absurd is the best way to get your point across and move a buyer forward another $5000.
The longer I’m in real estate, the more surprised I am about how much variance can be in the final selling price of a home compared to recent sales of homes that might be somewhat similar.
Only recently, we listed a home for sale that was appraised by other agents for figures anywhere between $560,000 and $590,000.
We appraised it for $620,000 – $640,000 and went a little out on a limb due to the fact that this home had a certain ‘X’ factor to it…despite the fact that the highest ever sale in the street was only $560,000.
After one open home and 45 groups through the front door, we had 16 written offers with the lowest offer being $600,000 and highest offers (there were several at the same figure) being $660,000 – a figure that was almost 5% above what we (and the owners) were expecting to achieve.
At the end of the day, it’s up to the agent to effectively market your home and negotiate the best possible outcome despite their opinion (which…as you know, comes attached with an agenda with many of the agents that offer an appraisal).
There are no crystal balls here and you’d be surprised to know how often we’re pleasantly surprised by a significant amount of money.
Until next week…Happy Listing & Happy Selling.