definition of market value
The way I see it, the problem with Sacramento home buyers who offer less than list price is it’s often a case of the blind leading the blind. I’m sorry, there is just no other way to say it. You’ve got buyers who have probably never bought a home in their lives trying to figure out how much to pay. And you’ve got a buyer’s agent who probably doesn’t sell very many homes. The agent most likely has had little, if any, training about appraising a home.
Often, these are buyers who offer less than list price because they saw an HGTV show. In those mythical fairy tales, buyers are always offering less than the amount the seller asks. Talk about overly generalized. We have a Sacramento sellers market, which means sellers can hold out for and will get list price. Very few homes for sale, high demand, hello?
Further, many agents struggle with deciphering comparable sales. They might notice a comparable sale in the neighborhood that sold for a higher price and try to compare it to the the home their buyer wants to buy. The difference might be a slight variance in the lot size. But they don’t know enough to figure out that maybe the back yard of that larger lot is filled with high tension power lines. So a smaller lot size does not equate to a lower sales price for the home in question. It is very likely they also don’t realize an appraiser might give only an extra $5,000 for a slightly larger lot. For many reasons, they hand out bad advice to a buyer.
Bottom line is most buyers who offer less than list price don’t get the home. The buyers wrongly blame the seller for being stubborn when they should be looking elsewhere for answers. These guys should be examining their own inadequacies. Coupled with the skills lacking in the agent they hired. Because that’s what caused them to lose the house.
Also, take a moment to realize that comps are not the only way to figure out the value of a property. Sometimes it really does boil down to the amount the seller will accept and the sum a qualified buyer will pay. That is the true definition of market value.
In closing, if a buyer is so certain a home is not worth the asking price, why not make a full price offer anyway? If it doesn’t appraise, the seller is likely to renegotiate. But the buyer will never get to that spot if the buyer doesn’t go into escrow. When it does appraise at the sales price, just close escrow. Get on with your life. Arguing gets you nowhere. Five years from now it will make no difference whatsoever.
Real estate 101 teaches us that market value is the price at which a seller is willing to sell and a buyer is willing to buy. However that doesn’t always apply to the amount a home will appraise for, and when you’ve got a lender involved at 80% of the value or greater, that lender will rely on an appraisal. And appraisals are an opinion of value, not fact. This is what can get Sacramento sellers in an uproar.
They know what their home is worth. I, as their Sacramento Realtor, also can generally accurately predict how much a buyer will pay, based on how I will market the property. Another agent might not get the same result; in fact, I know other agents don’t. Because they won’t take the listing. They think they know more than anybody else in the universe about Sacramento real estate. When they don’t.
I read a lot of blogs by agents who claim to walk out the door when sellers are “unreasonable” about their hopeful list prices. They act like it is beneath them or unprofessional not to take a listing at the market value they deem. Seems a bit arrogant to me. There are other ways to deal with this than to say adios, and don’t let the door hit you in the butt on the way out.
In hot seller’s markets, it is not unusual to sell a home for higher than its appraised value. I often get that result from my real estate marketing efforts. In those instances, the buyer can sometimes soften the sting of a lower appraisal by contributing cash to the transaction, and some buyers absolutely will accommodate that seller request. They realize market value is just one person’s opinion.
But the one thing that everybody forgets when they are riding on that high horse of they-know-the-market-better-than-anybody is what about cash? Huh? What about those cash buyers? There is no appraisal with a cash buyer. Many buyers from the Bay area pay cash. I market to buyers from the Bay area by networking with those agents, mostly foreign agents and their foreign buyers.
I had such a situation close escrow recently. I won the listing battle and had to call the rejected agent to ask him to remove his lockbox because he ignored the seller’s request to take it off. The agent appeared a bit snippy and sassy, saying he thought the price was too high above market value, and he didn’t want to take such a bad listing. Well, that listing sold after our open house at our list price for cash in 2 days and closed in 6 days. Sucks to be that agent right now.
There are many meanings to market value in Sacramento real estate, fine nuances. I’d also like to see the day the banks require two appraisals to justify market value. Why do they rely on the opinion of one appraiser anyway? If you’re looking for a Sacramento Realtor who uses her 40 years of experience to attract offers at maximum value, call Elizabeth Weintraub at 916.233.6759.