It is like April of 2005. I am sitting in a class to teach me how to be a realtor. It’s all been common sense stuff so far. I’m the only one who isn’t taking notes and who is wearing shorts. I am also the only person in that class who is still a realtor.
The day I have been waiting for finally comes. It’s the day they teach us how to do CMAs, which means Comparable Market Analysis, which means what a house is worth compared to what has sold in it’s neighborhood.
Figuring out value has always been fun for me. I like the numbers. I like the fortune telling aspect too. I love it when I am right, which happens almost all the time. The only time I don’t like it is when a seller thinks their house is worth more than I tell them. Usually what happens there is that some other agent gets the listing and I watch them reduce it until it sells for what I had already told the seller. It’s a hollow victory.
Back to that day. A line I will always remember was said by the broker of that agency. He said “If the comparable sale is superior, you subtract value. If the comparable sale is inferior, you add value.” Most of the people struggled with this since it is worded counter-intuitively. Sort of like asking somebody “Is red NOT your favorite color” verses asking “Is red your favorite color.”
By the end of that day, everybody finally understood that if the house you are about to list is better than the comparable sale house, then you need to add value to what the comparable sale house sold for to know what your listing is gonna be worth. There are assigned values for differences such as square footage, number of bathrooms, etc. Some of it is subjective too, and that is where experience comes in handy.
And all of this leads me to the real topic of this blog post. I almost sold a house last weekend. I looked at the comparable sales in the area for my clients. All the similar houses had sold for about $170-172k. The list price on the house they wanted to buy was $172k. Why did I suggest the value was about $165-168k then? All of the comparable sale properties had flat and usable backyards. The backyard for this house was flat for about 3 feet and then sloped steeply uphill. It needed to be worth LESS than the other similar sized and equally finished houses in the neighborhood.
The seller got a higher offer than the one we submitted. Good for him. Bad for the buyer. I am finding in this fast moving market that agents don’t seem to be doing as much leg work as they used to do. I suspect that the buyer’s agent just looked quickly and saw that similar sized houses sold for $170-172k and thought it was okay to pay that much. Looking at all the pictures would have helped. The buyer is probably happy to have gotten the house, but if they need to sell in a Buyer’s Market, they will realize that buyers who have choices prefer not to have a sloped backyard.
Those same buyers of mine ended up with a move in ready house that has a perfectly flat and private backyard. It will sell well in any market.