We have been meeting with lots of sellers over the last few weeks that wanted to put their home up for sale, and take advantage of a red-hot seller’s market. As one would expect, everyone wanted to get top dollar for his or her home. That can be accomplished; but some sellers can’t understand why they couldn’t list their home for any price they want. Follow the discussion below:
Agent: “The good news is that the comparables say we could list your home for around $600,000.”
Seller: “That’s great. Since it’s a seller’s market and there are no homes to buy, let’s list it at $750,000.”
Agents: “Well, that’s going to be tough since it’s $150,000 over market value. Buyers still understand and know when a home is overpriced.”
Seller: “Yeah, but if someone is willing to pay for it… why not. Let’s test the market.”
Agent: “Ok, let’s say a buyer is willing to pay $750,000 since 95% of all buyers in this price range are going to be getting a loan; but how do we plan on getting it to appraise?”
Seller: “Oh yeah, how would we get it to appraise?”
Agent: “We wouldn’t.”
Seller: “What if we advertise that we just want only a cash deal, no loans?”
Agent: “Should we also advertise that we are asking for cash only because we don’t think it will appraise? Most people can read between the lines and want to know why it must be a cash only deal. What do we say when they mention that they will do cash only, but they want an appraisal just to be sure?”
Seller: “Yeah, that could be a problem. Isn’t there some flexibility with appraisals?”
Agent: “Yes, 10, 15 or maybe 20K, but not 150K.”
Sellers need to be cautious in this market. Bidding wars and asking for inflated prices is all well and good, but what are you going to do when the appraisal comes in $50,000 less than the purchase price? Sure, there is a chance that the buyers will still go through with the deal and come up with the cash out of pocket, but not many will. Most will ask for a price reduction to appraised price, and if you are unwilling, the majority will terminate the deal and find another home.
If you want help navigating this fine line between getting top dollar, not leaving money on the table and getting the home to appraise, make sure that you speak with us at the Colorado Dream House Team.
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