Mastermind for September 26th. What is Market Value?
A few months ago I wrote about a Seller, who after weeks on the market, signed back his only offer for more than the asking price. You can read about it here.http://realtylaboratory.com/2012/03/06/seller-wants-more-than-the-asking-price/ . That story left a lot of people in our office scratching their heads. This week an even stranger story emerged along the same lines. An unrenovated property near our office has been on the market for nearly a month. One of our agents had submitted a really good offer on it (just slightly under asking price), yet it was rejected. Upon being questioned, the listing agent told our agent that her offer was actually the third and that the owners wanted more than the listing price. The listing agent was now going to terminate the listing and relist it at a higher price. (not just a little higher, a full $100K higher).
If you are like me, you are probably questioning the judgement of the Sellers. The reality is that if you have three offers, all within a few thousand dollars of each other, I think it is fair to assume you have determined market value. It is not a hard concept to understand. Simply stated, is the price at which an asset would trade in a competitive setting. So, what do you say to a Seller who uses these criteria to determine their home’s value;
- The price they paid + all the great improvements they made + the profit they want to make + real estate commissions.
- The price their neighbour sold for + more money because the they sold last year.
- The price their neighbour sold for + more money because their house is nicer.
- The price a friend or relative told them it was worth.
- The price their accountant told them they need to sell for in order to pay off their debts.
Breaking it down, what do you say to a Seller who thinks they know more than you? In the situation above is the listing agent dealing with a stubborn and determined Seller or did the agent not properly coach their clients? The reality is that this type of Seller behavior is completely unacceptable. One of the things we talk about religiously is pricing. Your listing presentation has to focus on getting the price right. If it is determined that a Seller wants $650,000 for their house than, at the very minimum, you should be listing at $650,000. This is especially true when you are in a balanced market. If you list at $600K with the hope to generate a bidding war and your only offer is for $585K? In a word….you are screwed! Granted there are a number of agents out there who are very skilled at generating a buzz. Their pricing strategy, listing under a determined market value, comes with a solid discussion about the consequences of not reaching a targeted price.