Buyers Often Insist on Making Unrealistic Offers
Contrary to popular public opinion, the end of the world is not nigh. The sky hasn’t fallen. But try telling this to buyers who get their news from television and the Internet, or sellers who remember the past a bit too fondly.
Many buyers want something for next to nothing, and in the Philadelphia metropolitan region, that isn’t going to happen in most cases. Statistically, prices in this market have remained relatively stable, while the homeowners remain established. They will wait for the right price … and wait … and wait. This makes the offer your buyer wants to submit – the one that is $75,000 below market value – a big problem for both of you. It’s a bigger problem if the seller is pricing the home $50,000 above market value.
Create a CMA to Determine True Market Value
Creating a buyer’s Comparative Market Analysis
(CMA) Report can help address unrealistic buyer expectations, and aid in negotiating with unrealistic sellers by using current market data to dispel the myths they may have heard from the media and neighbors.
Use These Tips to Find the True Market Value
- Whenever Possible, Select “Apples to Apples” Comparable Criteria. For example, if the home your buyer is interested in has 3 bedrooms and 2 baths, search for comparables with 3 bedrooms and 2 baths. If your results aren’t adequate, you can always revise them, but try to make it as close as possible. This takes more time than using ranges (3 to 4 beds, etc.) to find a large selection of comparables to choose from, but in the end, the more accurate your criteria, the less your buyer or the seller can argue about your recommendation.
- Use Search Tools to Find Similar Homes. Depending on the location of the house, the type of Area criteria you use will change. Will school districts play a major role in finding true comparables? Select the School District option under Area. Is the property in an urban area where home values can fluctuate greatly from block to block? The Map search allows you to create your own custom search areas using different map views, such as Bird’s Eye, which can help identify a property's proximity to train tracks, highways, high tension wires and even landfills; all of which affect the market value of a property.
- Understand What Doesn’t Affect Home Value. Is the seller tacking an extra $20,000 to their price because they added an in-ground pool? Hopefully they enjoyed it, but unfortunately for them, the return on investment is quite low in our region.
- Concentrate on Settled Listings. The facts are the facts. After you’ve selected the proper criteria, the sale prices associated with the Settled listings you find will tell the real story. Active pricing can be a hope and a dream in this market. Pending prices are only a sign that the negotiations have just begun. By arming yourself with sale price data, you can combat any inaccurate information your clients may have taken from major news organizations and infomercials.
- Keep an Eye Out for Seller Concessions. If the Settled listing has a significant concession, use the difference in your calculations: Sale Price – Concession Value = Comparable Price.
These are just a few tips you can use to help create a reasonable offering strategy for your buyer. What strategies do you use to get your client on the right path? Do your Buyer CMA Reports differ from your Seller CMA Reports, and how so? Share your thoughts in the comments area below.
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