Andrew Wetzel's Musings

August 26, 2017

One Price; Three Opinions

Filed under: Uncategorized — awetzel @ 2:43 PM

Ideally all sellers will select an asking price that attracts “ready, willing and able” buyers and meets appraisal standards. If selling Real Estate were that easy, Realtors would be fleeing to easier avocations! Even when the “ideal” happens, buying Real Estate is NOT a retail transaction so there are a number of potholes along the way as part of many transactions. Fortunately, an experienced Realtor knows where many lay and how to avoid them as well as how to navigate the surprises. That being said, why are there often three opinions (perhaps more!) when it comes to discussing the price?

Sellers will arrive at any asking price in a variety of ways. Do they want a quick sale, perhaps being willing to offer the lowest-priced property in their market? Are they only willing to sell and move if they achieve the highest price? Do they need a down payment on their next home? Are they inflating the price so that reasonable negotiating will get them what they think “fair”? Have they over-improved OR, alternatively, done nothing to their home? The rationale that sellers will use, if they are willing to provide it, is usually interesting, sometimes hard to comprehend but too often centered on their needs without fully embracing the other opinions likely to intrude. Frankly, that is fine:  we are here to educate our clients and there are times when their logic proves correct!

Buyers look at pricing from their own point of view. Some absolutely refuse to pay full price. Many want a bargain. To what extent they can and will compare houses to arrive at a price to offer and to what extent they accept documented history depends on the buyer, their financial ability and, ultimately, how much they really like a house. One house can attract multiple offers and those offers can vary as widely as the ice cream selections available at your favorite store. Whether we reach an agreement depends on how the seller’s asking price and expectations can be negotiated with a buyer’s financials and their expectations. Then comes reality!

Most sales involve lender financing. While lenders make money by loaning money, they need to protect their investment and their investment is placed partially in the ability and diligence of the borrower and partially in the property being purchased, the latter securing the debt in the event of non-payment. A lender may think you are the nicest person they have ever met but they still need to be sure that, if something happens to you, the house can be sold to someone else to recover their initial investment. The process seems to involve some loss of their investment despite their best efforts. They protect their interests by hiring an appraiser to look at the “subject” property and to evaluate it compared to similar, local properties recently settled. Their analysis results in a “best guess” as far as what the “subject property” is most likely worth to the general public.

The appraisal process is detailed and complicated with many rules and guidelines. Many find it amazing that they can actually boil the process down to a single dollar amount that is either higher (this is GOOD) or lower (this is BAD) than what a buyer and seller agreed. While I highly respect the analysis process and the arrival at a finite number, I have always felt that the “number” was sanitized, devoid of emotion. How can any piece of real property be worth an exact number that a human being arrives at? Regardless, it is the ONE external factor in the process meaning that someone other than the buyer or seller gets to decide whether the selling price works or not. Even then, if the appraised value is less than the selling price, the “principals” have recourse as long as the seller or buyer is willing to adjust their positions. The seller can agree to a lower selling price and/ or the buyer can use more of their own money.

Unless a buyer or their agent solicit the owner of an unlisted property, the typical process starts with a seller putting their property on the market at some price, seeing how the market responds, making or not making adjustments (there are times when sellers raise their asking price), eventually getting one or more offers which may result in a transaction that continues until finalized at closing or that gets derailed by some disagreement (such as can happen after a property inspection) or financing issue or an appraisal issue.

As stated in the subject line, there are three opinions concerning price! Serious sellers and buyers need to understand the whole picture and …

HIRE WISELY!

Please read my other posts at WhyAndrewWetzel.com and visit my web site AndrewWetzel.com

Advertisements

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: