The Truth About Pricing and Appraisals in a Competitive Market
Powerfact: Price the property high enough where it’s going to limit the number of offers, but still give you a multiple offer situation.
By Real Estate Coach and Speaker Darryl Davis, CSP
I was asked an interesting question this week: “In a competitive seller’s market, is it better to price high at the start, or price competitively when you want to encourage the most offers. I don’t want clients set up for low appraisals.”
In this current market, it really depends on what you and your clients deem more important.
The Truth About Pricing and Appraisals
If you go aggressive on the price, you are going to get a lot of showings, and a lot of offers. Yes, that sounds great, but it can work against you as well when it becomes overwhelming and confusing. So, don’t go SO aggressive on the price where you end up with 30 offers, because 10 offers are still good.
Your best option would be if you price the property high enough where it’s going to limit the number of offers, but still give you a multiple offer situation.
As to the part about appraisals, in this market, it’s my impression that in this market, the appraisers are still figuring it out. They know what type of market it is, so I suspect that you and I, and likely the rest of the Power Agents® are still in shock, because it doesn’t make sense! But, somehow, homes keep selling at these ridiculously high prices and the banks keep appraising it.
That being said, this is what you could do. You can put some protections in there for your seller, so if you have a multiple offer scenario and you’re worried about the home appraising low, you could say to the buyer:
“We can accept the offer, but you have to make an agreement to make two mortgage applications, and one of them is with whomever you want, but the other one is with my mortgage company.”
After that, you talk to your loan officer. You want to make sure that the deal goes through, so hopefully your loan officer agrees and says, “Yes, we can put that deal through. We’ll make sure we get an appraiser in there that will make it work.” Then, when you know you got that lined up, you can tell the buyer they can make an application wherever they want. But, if their application doesn’t go through, they’re going to have the Plan B option: go through your moneylender.
They will need to do both applications at the same time, because if the first one gets denied, the homeowner will lose valuable time while waiting for the second application to be approved.
Is this a lot to ask of the buyer? Yes. Is the buyer going to have additional expenses and application and appraisal fees? Yes. BUT, if you’ve got 10 offers on this house and that buyer doesn’t like it, then I’m sure one of the other 9 will agree to it.
That’s the beauty of a multiple offer situation in a market like this.
It’s more important than ever to become as skilled as possible in communicating value, negotiating for your client, representing our industry at high standards. As your coach, I encourage all our Power Agent® members to be on every Monday morning call. Our business, our markets, our ability to compete – changes almost weekly.
Get the Darryl Davis Newsletter!
Power Agents®, head to the Webinars on Demand tab to watch our webinar, How to Get Your Offer Accepted in Multiple Offer Situations. It’s PACKED with tools, objection handlers, communication tips, and more.
Not yet a Power Agent®? Click here to download your Multiple Offer Negotiation eGuide for Real Estate Buyers and Sellers.
Need help? Contact our team today at (800) 395-3905!