This time of year is always tough for comps…..which is the term we use for recent comparable sales used to determine the value of a house. Realtors use comps to determine a list price. Appraisers use them to justify a contract price. The thought is that the recent past will tell you what the market is doing now, but it really doesn’t work that way in a really good or really bad market when prices are either going up or down.
This reminds me of my old dog Julie. She was a beagle. She loved to go out in the yard and sniff around for critters. I remember one time she was on the trail of a rabbit. She had her nose to the ground and was on the trail of where that rabbit had been. What she didn’t know was that the rabbit was right behind her. That is how appraisals work. They always know where the market used to be and never where it currently is.
Part of what makes this time of year tough is that the market for the new year is kicking off and we are looking back at late fall and all of the winter to determine value. Sales are usually down in the winter and most of what sells are the leftovers from last summer.
So, we are looking at the worst times to sell to determine a value during the best time of the market.
I personally have a house that I sold for $200k. It only appraised for $185k. The best comps for my house were from 6-12 months ago. So we have a big gap between what a real buyer with money will pay for a specific house and what an appraiser, whose job is to determine market value, says it is worth.
My current dog Sherpa is a dachshund-Jack Russell mix. She has no problem keeping up with critters in the backyard.
I wish we had a system of determining value more like Sherpa than Julie.
A buyer of mine just bought a house that was for sale by owner. Nice sellers. Nice house. They have been very easy to work with so far.
Being unfamiliar with the contract that all the realtors in this area use, they did not like one part about the termite inspection. It was the part that says the seller has to pay up to 1% of the sale price to repair termite damage if any is found.
They said they didn’t want to be on the hook for that much. I get it.
However, this clause benefited the seller just as much as it did the buyer.
I’ve sold hundreds of houses and been involved in the inspections for all of them. I have only seen 3 houses that had extensive termite damage. All were in houses where the sellers had lived there for decades and never done a termite inspection. It is pretty rare to find termite damage. Most of the time if there is any damage, it only costs a few hundred dollars to repair.
Let’s say there is some termite damage at this house and my buyers decide they do not want the house any more.
In this case, the seller would have been very happy to say to the buyer “No, you can’t walk away from the sale. The contract says you have to let me fix it and by golly, I am gonna fix it.” The seller would want to use this clause in the contract to keep the sale together.
Sometimes things just work out perfectly.
A friend of mine referred me to one of his friends. This seller needed to sell his house quickly without having to do a lot of prep work.
I’ve always got a long list of people who are looking for something specific. I’ve got a guy wanting a ranch on a golf course. I’ve got investors looking for various houses to fix up or rent. I’ve got people looking for their ideal move up house. I’ve got people looking for rural properties in very specific spots. None of these buyers are actively looking. They are just waiting for me to call them up and say “I’ve found it!” I’ve also got plenty of sellers in my pipeline who may sell sooner than later if the right situation arises.
I also have a buyer who has been looking for a similar house in the exact neighborhood as the one that this new seller has.
So, I arranged a viewing.
Then a deal was made.
The seller got the fast sale they wanted without all the prep work before listing.
The buyer got the property they have been waiting to buy, including the huge dining room she wanted.
I get the satisfaction that I brought two people together whose needs were met perfectly by what the other party had to offer.
Sorry if I have that Whitney Huston song going through your head now.
Buying a house is stressful. You don’t want to lose a house and at the same time, you don’t want to make the wrong decision.
Back before the market got so hot, I would tell people they know they have found the right house if they wake up the next morning afraid it is no longer available.
I haven’t said that in a very long time because usually, a good house is sold long before you ever get in bed to sleep on it.
While I can’t really give that advice any more, the principle is the same. If you like the house enough that you don’t want to lose it, that is probably a good sign that it is the right one.
Some questions I occasionally like to ask when a buyer is unsure:
Can you see yourself waking up here every morning?
Can you see yourself tucking your kid in bed here?
Is there anything that is such a big turnoff to you that it would make you miserable living here?
Think about what your daily routine would look like in this house?
For most people, buying a house is an emotional decision. Sure, there are basic parameters of size, location, etc. Among all the houses that meet that general criteria, buyers pick the one that makes them feel the best.
You know, I’ve been doing this for a long time. You start to see patterns after a while. I guess that is called wisdom?
Here are some things I have learned that are typically true in real estate:
- If somebody says they are going to make an offer, every hour afterwards that you don’t have it in hand reduces your chances of getting it at all.
- If you are a seller and decline a showing, few buyers ever reschedule a time. They say they will come see it later, but never do.
- Usually the best offer you are going to get is the first offer. The times it isn’t the best offer, it will be the worst.
- If you get 10 offers on your house, 8 will be practically the same, one will be crazy low, and one will be the best.
- If 20 buyers have seen your house and given the same feedback about the condition and list price, odds are the next 20 buyers will say the same thing.
- If you get a full price offer the first day, that means you priced it just right. Don’t wonder if you should have asked more. When a house is priced too low, almost always does it get more than one offer and both will usually be above the list price.
- If you feel like you got a good deal on a house, most likely it is because it was a house nobody else wanted. You will have to give a good deal when it is your time to sell.
- Crazy realtors have the craziest clients. You can often tell a lot about a buyer by who their realtor is.
- The more complicated the deal is, the more likely it is to fall apart.
- The longer the time between contract acceptance and the closing date, the more likely it is to fall apart and not close at all.