Our spring real estate market is in full swing now although it took a little longer than usual to get started. There are many, many new listings coming into the market in the Fraser Valley and there are also lots and lots of serious buyers for those new listings. The good news is that, banks & government willing, this market should be with us for some time.
The title of this column is one of the topics that REALTORS® are running into a lot these days. It seems to make good sense. If we ask a little (or a lot) more money for our home than what the REALTORS® Comparable Market Analysis indicates our home's market value is, maybe one of those buyers will fall in love with our home and pay the higher price. If not we can always lower the price later. Besides, people can always make offers and we can negotiate. It seems like a can't-lose situation. A deeper analysis, however, uncovers some very uncomfortable problem areas.
Perhaps the most obvious one is that when the in-love-with-your-home buyer applies for a mortgage to complete the purchase they run smack head-on into a flinty-eyed, tight-fisted, banker who is only prepared to lend money on the bank appraised market value which turns out to be remarkably similar to the price range from the REALTORS® market analysis and much lower than the agreed upon price. Consequently the buyer can't get the mortgage because there isn't enough collateral in the appraised value to cover the mortgage according to Canadian legal requirements. So the buyer is unable to complete the purchase unless they can come up with more cash and don't mind doing that. That special sale that you thought you had turns out not to be attainable.
But there are other less noticeable problems that could actually turn out to cause worse problems for the homeowner. When your house appears for sale in the market there are a certain number of serious buyers who are searching the market for the right home, now. They have been looking for a considerable amount of time and have seen a substantial number of houses. In fact, many have seen everything that appears to suit their wants and needs and haven't yet found the right one. Maybe they have even tried an offer on one or two but haven't been successful, maybe because they have been outbid by another buyer, or perhaps because the seller wasn't willing to accept the market's analysis of the value of the home and wanted more. They have seen everything and have gained a very accurate and intimate knowledge of market value because of all the houses they have seen and the eventual selling prices of those that sold. They have become experts and they, and their REALTOR® are watching the new listings daily. If they come across one that seems to meet their needs and is market priced they want to see it now and they are quite prepared to write their offer and pay full market value. They have been looking for a long time and are prepared to act now.
If you are asking a significantly higher price than market value they are not even prepared to make an offer---they have "been there, done that" before and don't want to waste any more of their time. They just move on. After 2 or 3 weeks your REALTOR® has gone through the current buyers that are out there and now the REALTOR® has to begin to develop new buyers---ones that are just entering the market. It's a long, slow, expensive and arduous process and these buyers have not become knowledgeable about pricing. They are more inclined to make a much lower offer and try to negotiate you down.
So the net result is you've scared away a knowledgeable buyer who would have paid you market price and now you're dealing with buyers who want to pay less because they aren't knowledgeable about the true value of your home.
You've ended up in a no-win situation instead of a can't-lose situation.
Stewart Henderson / Langley Times