A good many of us have played a pinball machine. A friend of mine, "Big Al," restores and maintains them as a hobby. He has a brilliant mind that can disassemble anything and reassemble it in better-than-new condition. Most importantly, he knows what they are worth.
Friday afternoon we had a conversation about him "previewing" a pinball machine. Big Al drove to Fort Myers to survey the machine and see if it would be an option for reconditioning. This machine looked like a regular pinball machine. It had flashing lights, themed sounds and a slot for the quarters. To a novice, it would have definitely seemed adequate. Big Al knows a lot about the machines and if he doesn't know enough about a specific machine, he'll find out more.
After some digging through the recesses of his mind, asking his friends and searching the Web, he felt this particular machine might not be priced at what the other comparables were selling at. There were a few features missing from it.
Price is only good if there is value. If it all looks pretty but it is overpriced and it's not delivering the goods, it's not going to sell, unless to a sucker.
The owner of this machine didn't know a thing about pinball machines, never maintained the one he owned, is asking more than what was paid for it a few years back and basically knows nothing about selling it. I think to myself: This isn't much different from valuing and selling real estate. It's just a different item.
Any person can own any kind of property like a car, a pinball machine or even real estate. When they decide to sell it they may even advertise it themselves and for that matter sell it themselves. Here's how it applies to real estate: A homeowner should find someone to evaluate the home to properly price it. I'm not saying that homeowners can't sell their own real estate. I'm saying they may find difficulty pricing it right.
At worse they might underprice it and leave money on the table. If it gets overpriced, they may actually lose money in holding costs. Sure, anyone can find out the advertised price of other homes in their neighborhood, but it's what has closed sales, inventory absorption and buyer interest that creates or diminishes value.
In order to properly price real estate, a homeowner should either get an appraisal or a comparative market analysis based on the last three months of closed sales of similar properties in the area. We're talking the price recorded at the county clerk's office, not the price that was on the "just listed" or "just sold" postcard that came in the mail. There are a few online services that can guesstimate a value, but their systems haven't been perfected.
So Big Al went to see a machine that was valued at $1,500, already dropped down from $1,800 and but was really worth $1,000. He made a fair offer ($1,000) and invited the seller to call if he had a change of heart. The value was based on recent closed sales, and online pinball database figures and buyer interest. How is this so different from Bob and Betty who are asking $1.5 million for a shack when it's worth only $1 million and there are many to choose from?
It's nearly the same basic principal, hopefully minus the flickering lights and a smoky cigarette smell behind the glass.