When Homes in Placer County are Priced Under Comps
When the appraised value of homes in Placer County are less than the prices of homes for sale in your particular neighborhood, you may encounter problems selling that home in Placer County. Prices have not appreciated in all neighborhoods over the past couple of years in Sacramento and Placer, especially in certain high end gated communities when the attraction specifically targets a certain kind of buyer for a luxury home.
In some of those areas, when a listing agent is doing research it helps to look at the market from the eyes of a buyer and not the seller nor the appraiser. After all in the end it is always the buyer who determines the price, regardless of what the seller, the agents or the appraiser may believe. If a buyer wants to pay more than the appraised value, the buyer is rarely prohibited from doing so by financing restrictions.
Standard business practices calls for Placer County listing agents to perform a comparable sales search within a half-mile radius of the property or maybe even within the same subdivision, but there is a benefit to looking at the real estate market outside of those parameters. Why? Because buyers do. Buyers are generally not wedded to our industry boundaries. They search an entire area. If buyers can purchase the same type of home a mile away, only better and bigger for less in the same type of neighborhood, they will do it.
Basing values on the prices of active listings is not typically a high priority when pricing a home because sellers can stick on any old price tag and find some newbie agent willing to stick a for sale sign in the yard. It’s the comparable sales, the homes that have actually sold, that tend to establish value. Unless they don’t establish value. It can happen. Then active listings are very important to compare to your home.
Take a subdivision of homes in Placer County where there have been no sales over the past 3 months. I had one of those briefly listed, and the comparable sales from months earlier – sales that an appraiser will not a lot of weight to because they fall outside of the accepted timeframe – reflected a much higher value. In reality, though, after trying to sell the home for 3 weeks, it became clear that the sellers had paid more for the home a few years back then they can probably sell it for today. Doesn’t a listing agent have a fiduciary duty to disclose those findings to the seller?
You would think so. But listing agents are often reluctant because the messenger tends to get shot. I will tell a seller, though, if I see it is highly unlikely a seller will receive the price he believes the home should sell for based on the comps. For example, if there are homes for sale in a subdivision, and the last 3 homes that sold were single stories and 4 of the 6 homes for sale are single stories, and your listing is a two-story what do you think will happen? Single story homes are also more popular.
Further, if out of those 6 active listings of houses in Placer County, your home is the highest sales price, buyers will lowball that price. The price per-square-foot tends to lose its grip. Luxury home buyers can face too many choices in some areas. They want to pay the same price for a larger home that mirrors the price of smaller homes. Of course they do. They want the most house they can buy for the least amount of money. That might not be the sellers’ goal and in that case, the home should probably be removed from the market.