I just had a listing of mine sell for $20,000 more than I expected it would. Was I that off? The house was in my neighborhood. I keep up with all the activity out here. I’ve also been in enough houses out here to know how it compared. Plus, the comps all testified that my number was much more realistic that the price at which it sold.
What gives? Well, the bottom line is that the buyer had an agent that must not have done much research. I see this ALL the time. I had a listing in Nicholasville this spring where the buyer’s agent called me before they left the house with a verbal offer. Now, how in the world could she have had time to look at the comps and assess the value of the house? She obviously didn’t. My seller was priced on the high side there too, and these people were basing their negotiations off the list price. That is never a good idea. FYI, I had an appraiser that was using that house as a comp even call me a few months later asking if the seller had paid any closing costs and if it was an “Arms Length Transaction”…..all of which is real estate speak for asking why did this house sell for so much more than any others on the street. My answer was “Lazy Realtor.”
Back when the market was hot and I was a newbie, the house across the street from my old place was for sale. I was friends with these folks. They would have used me to list the place, but they had just paid top dollar 2 years earlier and didn’t have the equity for a commission. The price they asked was waaaaaay over the top for Gainesway. Well, along comes a nice couple with a tight timeline and a lazy realtor. The seller got his price. The price was so high that the appraiser had to use comps from across town to justify the price. Before long the buyers realized they had paid too much. Seems they had a tight timeline and had just started looking at higher priced houses. They saw this one, liked it, and just assumed the value was there. It obviously wasn’t.
Another story for you. I met a really great couple who moved down here from a more expensive market. They ended up with an agent who let them buy the highest priced house on their street…..and got them to pay the full asking price? To them, everything seemed like a bargain, and they trusted that the person who had a fiduciary duty to protect their interests actually would do so. Another FYI, I had a buyer for a house recently where the seller had also used this agent when they bought it and paid top top top dollar for the house……and the full asking price. This agent doesn’t even have an excuse since both of these sold long after the market cooled.
Okay, back to my recent listing. The buyer was from out-of-town. The agent didn’t do much work in Lexington. They had been looking at more expensive houses, and had just lowered their price range. It was a cash deal, so we weren’t going to have an appraiser bring us all crashing back down to reality.
So, what can you do to prevent this from happening to you? First, get an agent that knows what they are doing and actually cares about what happens to you after their check has cleared the bank. To me, here is a good test, ask them what the house is worth. If they spit out a number immediately, or say anything that indicates they are working from the listing price rather than recent sales in the area, fire them. My standard response is always “Let me look at the comps and get back to you.” Any of my current and past clients that are reading this are probably chuckling right now, having heard that so much. Have your agent do a CMA (Comparative Market Analysis) on any house before you make an offer. It is a mini appraisal basically. That is the standard by which we establish value. Ask to see the comps. Also, your agent should know if the sale price had any seller concessions built into it. A house that sells for $200k and the seller paid $6k in the buyers closing costs really had a net sale price of $194k. If you don’t know that going into the offer, you can overpay even if the agent did a CMA.
Another time that I see people pay too much is when you change your price range or are in a hurry. Anytime you go up or down in your price range, look at several listings so you can see what is typical for that range so you can pick the best one. If you can’t, ask your realtor if the house is typical for the price range/neighborhood. If you are in a hurry, have your agent do some homework for you. When I have out-of-town people, I try to get a feel for what part of town they would like, then I’ll preview some houses with my Flip video camera so they can be narrowing the field before they even get here. When it all works perfectly, and it often does, they have less to deal with while they are in town and can focus on only their best options.
I sure hope this helps somebody because it makes me sick to see people in today’s market pay too much for a house.
NEXT BLOG? HOW TO PREVENT DRAMA IN YOUR NEXT REAL ESTATE DEAL.