McClelland Minute - September 12, 2010

Truth or Consequences

The selection of a Listing Realtor to work with you and your family should have at least two phases, the first being a logical approach to establishing value of the subject property.  The second is more like any job interview, where the Realtor lays out in detail how they will support you through the many intricate stages of facilitating the sale, should they be given the contract.

I average over 200 Opinions of Value every year on all types of property across the region.  It never ceases to amaze me how some, but fortunately not all, customers equate quality with what they want to hear, and not what they need to hear.

In the mind of the Buyer, value has four elements – condition, presentation, location, and price.  Yes, I believe price to be only one factor and can be summed up in a single question:  Given what we know about the property is it a reasonable expectation in today’s market?

Your Realtor should use accepted appraisal principles that are appropriate to the type of property under consideration.  For example, with single family homes, he or she will be able to show you several sales of comparable properties and define some of the differences in features like size, effective age, etc. that will adjust fair market value of your house up or down.

With contribution from the Seller, I also like to narrow down the demographic profile of the two or three groups of potential buyers that the property will likely appeal to, and then discuss how many of each group that we estimate to be actively searching for property at this time.  The Market value of any commodity is heavily influenced by supply and demand, with the attendant upward or downward pressure. We also can’t ignore what is happening in local and national economies.

If a community has a small inventory of starter homes, but steady interest by first time buyers, then we can assume there is certain stability in the pricing trend for that particular type of property.  If mortgage rates are climbing, then we know from past experience that there will be fewer buyers capable of financially completing a transaction as time goes on. 

None of this methodology is magic, just a mixture of science and experience; which brings me to my second point.  It is truly frustrating to watch customers interview Realtors from several brokerages just to see who will offer them the highest listing price.  This is like choosing a spouse who promises you the biggest wedding ring.  If you ask too much, the buyer prospects will simply pass you by, or wait on the sidelines until life forces you to get real.  One colleague states it this way – not pricing it to sell means you have just bought it back!

Ask your Realtor what specific strategies they will employ on your behalf, and hold them accountable for it.  Again though, you don’t just turn a herd of cattle into the balestack expecting them to efficiently consume their feed.  It should be a common sense and methodical approach to canvassing for buyers.  Remember, under the performance based compensation system we have in organized real estate, We don’t get paid unless you get paid!

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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