Divorcing sellers sometimes fail to appreciate the importance of pricing a property properly. Of course, we all want to net as much as possible from a sale, and this is frequently especially important for divorcing clients. But the truth is that sellers will frequently net more if they start out with a realistic, rather than an inflated, asking price.
Pricing is an art, not a science. I recently underestimated the value of a property by $75,000, and I was worried about pricing too high! After receiving multiple offers at list price, we put out a request for highest and best offers. Those sellers ended up receiving two offers for $75,000 more than list after three days on the market.
On that same transaction, the lender’s appraisal came in $100,000 BELOW our list price! The buyers were so determined to purchase that they came up with the difference in cash, after the appraiser refused to adjust his value to reflect the existing primary and back up offers.
The appraiser was so far off base because he selected in inappropriate market area, and then relied heavily on trends in that area despite clear evidence that this particular property was in high demand. It happens, and this is a good example of why relying on an appraisal is not always the best idea. If an appraisal is appropriate in your case, but the appraised value seems questionable, consider getting a second appraisal. The differences in value may surprise you.
In almost all cases pricing too high will prevent some potential buyers from ever considering the property, result in more days on market and carrying costs, and, ultimately, may result in a sale price under the price that could have been realized had the property been priced well at the outset. There is a strong correlation between days on market and greater discounts to list price. Sometimes the eventual sale price will equal the initial recommended list price, but sometimes it is lower. The property is no longer new to the market, the initial pool of potential buyers has already moved on, and with less competition for the property, remaining buyers will make greater demands in terms of price, repairs and credits. Also, price drops lead buyers to wonder how much lower the sellers are willing to go, and they may sit back and wait or submit a lowball offer. On the other hand, if the property could sell for a little more than list price, as evidenced by showings and offers, it is simple enough to call for highest and best offers.
Sellers may believe that the list price recommended by the realtor is designed to result in a quick sale, and thus commission, rather than to maximize the net proceeds to the sellers. Of course realtors are required to put their clients’ interests first, but there’s no doubt that, from time to time, a realtor will fall short in the exercise of his fiduciary duties. If the realtor can demonstrate the basis for her value opinion with carefully adjusted comparative sales in a Comparative Market Analysis, it is usually wise to adopt that as the list price, and be prepared to make adjustments as the realtor recommends.
We offer Comparative Market Analyses and Listing Services on all islands. Just get in touch!
