Messenger Listing Agent
I think the prospective client to whom I made a listing presentation the other week is hiring someone else.
Or, at least, I think he is; he never returned my phone calls after the meeting.
Setback — Or Not?
Five years ago — 60 or 70 deals back, in Realtor vernacular — I would have felt discouraged about such a result.
I’m much more philosophical.
While I certainly feel a “twinge” from the rejection, I also know that, had I been hired, I would have likely spent six months of time and energy trying to sell a home at a price that wasn’t sellable.
That’s because the owner lives in the high-priced Bay Area — he’s in town to sell his long-time family home in Minnetonka as part of an estate sale — and has no idea what local real estate values are.
Apparently, he’s under two, mistaken impressions: 1) that a property’s tax assessed value sets a floor under its value (and that the true fair market value can be as much as one-third higher); and 2) that an appraisal that’s older than six months is still valid (if it ever was).
Tax Assessed Value: Premium & Discounts
In fact, two things are true of a home’s tax assessed value, at least in the Twin Cities as of Fall, 2012: 1) it’s impossible to predict what a home’s relationship to its tax assessed value is, without knowing the home, its condition, and location — except perhaps to say it’s likely within 25%, plus or minus (ironically, that’s also what I’ve found to be true of Zillow’s wildly inaccurate “Zestimates”); and 2) homes that are dated, and need more than $100,000 of remodeling (for a new Kitchen, new Baths, etc.) often sell at a hefty discount to their tax assessed value these days.
That’s because, in today’s still-sluggish economy, everyone wants a home in mint, move-in condition, but they want those improvements baked into their (cheap) monthly mortgage payment, vs. having to shell out for those things out-of-pocket, post-closing.
Of course, that’s in addition to spending six months overseeing — and perhaps living amidst — the work-in-process.
Meanwhile, an appraisal has a shelf-life, just like a gallon of milk.
Even if the appraiser chose good Comp’s and made accurate adjustments at the time of the appraisal, housing markets change, new homes come on the market and sell (or don’t), etc.
As a result, the likelihood is that the original Comp’s have been superseded by three, more recent transactions.
See also, “Why the Neighbor’s Home Isn’t a Comp“; “Real Estate Bracketing — Advanced Beginner Version.”
Shooting the Messenger
I discussed all those things (and more) when I met with the prospective client for 2+ hours recently.
But, I thought I saw the lights go out when I got to the part about tax assessed value, appraisals, and current fair market value.
Either that, or he didn’t like my cologne. 🙂
*Six months of trying to sell an unsellable home = 4-6 consummated transactions.
In economists’ parlance, taking an overpriced listing has a high “opportunity cost” for a Realtor.
See also, “The Serenity Prayer — Realtor’s Version.”