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The Power of the Mighty Appraisal

May 21, 2008

My experience as a Certified Residential Real Estate Appraiser (and the 1,500+ properties I’ve personally appraised over the last 6 years) helped both one of my sellers AND one of my buyers recently on two different deals. Here’s how:

I listed a property at the old Sanford Mill in Medway recently. It’s an old converted grist mill (circa 1881) located on the banks of the Charles River with a waterfall, soaring wood planked ceilings, exposed brick and floor-to-ceiling windows. Very cool. What’s not so cool is that there were 8-9 other very similar units currently on the market with us. My first step as “The Appraiser-Realtor” was to perform a full-blown Fannie Mae appraisal report. This made our pricing decision very easy. We priced it according to the most recent market data, BASED ON THE BEST COMPS AVAILABLE. Not based on what the owner thought it was worth, not based on what the owner wanted to walk away with ($), not based on the assessment….but BASED ON THE MOST RECENT, MOST PROXIMATE, MOST COMPARABLE SALES. We presented this report publicly to all open house attendees and potential buyers (we only had one open house).

In 20 days the unit went under agreement, pending sale shortly. The other 8-9 units in the complex are still for sale. When our unit closes they will all have to do a reality check and adjust accordingly if they seriously want to sell, because our unit just became the “most recent, most proximate, most comparable sale”.

For my buyers, we presented an offer on a property with (again) a Fannie Mae appraisal of the property attached. We made a strong offer, but considerably less than the seller was listed at. After a little negotiation, we secured a price nearly $30,000 less than the list price for my buyers. And the seller didn’t feel like we were low-balling him (there is no such thing BTW…another post) because our offer was backed up with hard market data. We explained that although his house was beautiful and my buyers liked it a lot, they, like most all buyers, would need to obtain financing and financing is contingent on an appraisal….just like the one we provided with the offer. We went through the comps together. I asked them if I missed any comps that would put the value higher. He cited comps from over 12 months ago and in more desirable neighborhoods over one mile away. I explained how strict banks are getting on appraisals and that the rule of thumb is 3-6 months old and no older and one mile or less away. I SHOWED him through my appraisal analysis that his lovely home (which it was) was actually worth less than he thought to a unbiased third party…like a bank!

By using the appraisals in a consultative, non-threatening way in each case I was able to secure deals on both properties that were favorable to all parties involved. Although ALL buyers want a steal, if they really love the property they will be more than happy to pay FAIR MARKET VALUE for it, and that’s where my appraisal experience comes in handy.

Saves time for sellers (which is very often equivalent with money) and saves cold hard cash for my buyers! Win-win any way you slice it up! When you start at the end (the appraisal) the road to get there is often less bumpy and easier to find. I see so many listings padded-priced these days, meaning “we know it’s worth a little less than this, but we want to leave some room for negotiation”. HUGE mistake in my opinion! Price it as close to true market value as possible, BACK IT UP WITH COLD HARD MARKET DATA, and stand your ground, pointing back to the comps that you based your price on. At the end of the day, it’s only worth what someone is willing to pay, but like I said, in my experience buyers are happy to pay fair market value for a quality property they truly love.

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