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.
A common question asked by Sacramento real estate agents and directed toward the listing agent is how much will the seller take for that home? Now, you see, I could swear that there is a listing price attached to that home, but maybe the print is too small to read. I know, we could outfit buyer’s agents with those big honkin’ magnifying glasses like you see in photos of Sherlock Holmes. Or, maybe we should attach spectacles to a chain they can keep in their pockets or wear around their necks to whip out for such an occasion?
When an agent asked me that question yesterday, I immediately suggested he look in Zillow. I was being facetious, of course, but he didn’t realize it because I made that suggestion by projecting a lot of excitement and enthusiasm in my voice. I can’t help it. I have fun at work; and I like to make people laugh. Except the agent didn’t laugh because he didn’t know I was joking. I mean, let’s face it, Zillow is the last place for any reasonable much less professional real estate person to look for a market value, but that doesn’t mean the public doesn’t go there because they do. The professionals, on the other hand, use MLS for comparable sales to determine market value.
But it’s such an innocent question, an outsider might presume. How much will the seller take? It is . . . for a person who is not a real estate agent. And I suppose that question is OK for an agent to ask as well if they can get an answer. As my husband is fond of saying: a guy can ask 10 women to go home with him at the bar and the first 9 might slap his face. But that 10th . . .
I asked the buyer’s agent why he would ask me, the listing agent, because I am not the seller. I don’t make decisions for the seller and all that I really know for certain is the seller will accept list price. Not to mention, it’s a breach of fiduciary to utter any kind of different answer.
Well, he didn’t want to “waste time” writing an offer the seller would reject. What? Isn’t that the name of the real estate game? An agent writes an offer on behalf of a buyer and a seller either accepts, counters or rejects? And there is one way to find out what a seller will do, too. If you want to know how much the seller will take for that home, there is one sure-fired, tried-and-true-method to get that answer. You write a purchase offer and send it to the listing agent.
Trying to pick a sales price when there are few to none comparable sales is a little bit tricky in our Sacramento real estate market, but this is when an experienced real estate agent can be very helpful. Sometimes it comes down to relying on gut instinct, mixed with a bit of pixie dust sprinkled on top of those dusty old comparable sales, to come up with an accurate and reasonable number.
Further, I might do goofy things that are right on target such as grab a random sales price from 2005, divide it in half, multiple that result by 50%, and then slap another 25% on top to arrive at an estimate of value, which is often much closer than Zillow’s screwy Zestimate and computed about in the same fashion. But that’s just to double-check the ballpark. It’s not to pick a sales price.
When talking with a seller who just closed escrow yesterday on a fixer home I had listed, we had discussed the sales price and reviewed how we arrived at the final number. I confessed that it wasn’t based entirely on the comparable sales. My input was based a lot on how much I thought we could get for the property, resulting in the intrinsic market value of that home. The seller laughed and said he realized I had grabbed it from thin air when I made the recommendation.
Well, I wouldn’t say thin air. But it was an educated guess. It was an educated guess because although I had examined the comp prices for turnkey homes, I had not arrived at a value for the unknown condition of the property, which was basically trashed. I had been expecting to see a home in move-in condition. These types of homes are a bit difficult to price when the home has so much wrong with it that you can’t even figure out which part of the house you’re standing in. Oh, this must be the living room, I muttered to nobody, when it dawned on me where I was as the floor suddenly sloped down under my feet.
After hitting the market, lots of agents called to give me push back and to complain about the price. They thought it was too high. Many offered substantially less. They moaned and groaned. Hey, give the sellers what they want, I suggested; it’s simple, just do it. Don’t yak at me about the comps and your honorable intentions. Put up or shut up. Then, two buyers submitted offers that were very close to our asking price, and those were the two buyers we worked with, closing with the best offer and zero renegotiations during escrow.
Sometimes, you just get lucky trying to pick a sales price, but it helps to have experience on your side when you’re the seller.
Condition of property is one of the big three elements when selling Sacramento real estate— or any home in the Sacramento seven-county region — but it’s often overlooked or dismissed by sellers. They get used to their house the way it is. They might say something like, “Oh, we’ll let the buyer take care of that issue.” Unless the house is pretty much a tear down, or needs such extensive work that we call it a fixer home, a home buyer will not do those repairs / corrective work. End of story. Only an investor will buy that kind of home today. And investors aren’t paying full price this spring.
The three key elements for selling a home in Sacramento are:
You can have a great price at market value that would apply to a turnkey home in a fabulous sought-after neighborhood, and it still won’t sell because the home is not fixed up. You can have a great price for a good location and a home in move-in condition, and the home won’t sell if it’s located in a bad place like under a freeway or next-door to an apartment building.
If the home needs major work, you should just do the work before putting that home on the market or else adjust the sales price accordingly. If the home is located in a bad location, your sales price also has has to come down and be adjusted for that location. You can’t get top dollar for a beautiful home in a bad location. You can’t get top dollar for a fixer home regardless of its great location.
These are the rules of real estate. I don’t make them up. These rules are not something this Sacramento real estate agent has plucked out of thin air or can bend at will but that’s the way some people react to the news.
The only way you’re getting top market value for your home is if that home has a great location and is in top condition. You need all three elements to command the top of the market, even in a seller’s market.
Buyers want a turnkey home in a good location, and they don’t want to do any work. If you’ve got ugly carpet, you need to replace it or be prepared to be hit with a lowball offer that will far exceed the cost of replacing that carpet.
Most clients will say that they completely trust and value a professional opinion until the day comes when they disagree with their real estate agent. The agent can see it coming, too, but by then it’s generally too late because the client will have already said something emotionally telling like, well, if you don’t agree with my opinion of value, then you should ask my daughter. The daughter who is not a Sacramento real estate agent and who has no experience in real estate.
The agent can haul out the heavy artillery, the trending charts showing the past year or so of real estate activity in that particular neighborhood, including days on market, sales price to list price ratios, absorption rates, median sales prices, inventory levels, but it won’t matter. It won’t matter because the client will spot a home that is nothing like the client’s home but that home will have sold for much, much more than the true market value of the client’s home. That particularly expensive home might have sold for more because it has a spectacular view, which the client’s home does not. That home might have sold for more because it is 1/3 bigger than the client’s home. That home might have sold for more because it has upgrades and features that the client’s home might not possess.
None of this will make any difference to the client.
This could be a case in which the client might utilize the per-square foot cost of that more impressive home and apply the same value to the client’s home, therefore proclaiming a higher sales price that will not appraise under any circumstances. The Sacramento real estate agent can point out that any reputable appraiser will use 3 to 6 comparable sales to justify the sales price, and explain that an isolated sale is not enough to substantiate a higher price. Because the comps are the comps are the comps; however, the agent may as well be speaking to a Muppet.
The agent can invest hours preparing a comparative market analysis, utilizing several independent sources, but it won’t make any difference to the client because the client wants the price that the client wants. To educate the client or try to justify a different opinion means only one thing. It means that the client will choose a different agent who agrees with the client. Probably an agent the seller’s daughter knows.
And this is why clients will say that agents only tell them what they want to hear. Because these are the very people who set themselves up for failure from the start. They sabotage themselves.
By the time the home closes escrow at a much lower price, the client will remember the agents. He will recall the argumentative agent who refused to agree with his point of view, and he will recall the agent who sold his home for so little that she forced him to “give it away” — and he won’t have anything good to say about either agent. They’ll pretty much all be scum is his book. And that’s too bad.