pool heater

Just Because You Don't Like it

Doesn't Mean it's Not True

Bad news stinks.  Nobody likes to hear it and nobody likes to read it.  It is with great regret that I have to bring bad news to home owners that have decided to sell their home and haven't come to the realization that they will be selling their real estate for less then they felt it was worth.  Sometimes it is even worth less than they paid not too very long ago.

The fact of the matter is we're in a buyers market.  A buyers market that is different than any other buyers market that this area and even our nation has ever seen before.  In order to sell a home in this buyers market, a home has to be sold three times.  Yes, Three times.

  • First to other real estate agents
  • Second to a buyer
  • Third to an appraiser

Real estate agents bring buyers into your home or condo when it's for sale.  They can and will easily weed out homes that are over priced or do not have the same features and upgrades for the money of other homes in the same class.  If you're looking at neighborhood with production built homes, there sometimes isn't a huge amount of variation or changes in homes.  It makes no sense but I've seen as much as $200,000 price difference in the same style floor plan with no difference in upgrades or features.  For example, Divosta homes builds in Village Walk of Bonita Springs.  The homes and villas can have a few limited upgrades, but for the most part the homes are quite similar.  An Oakmont floor plan home can be priced anywhere from $325,000's to $450,000*.   The price difference of $125,000 is nothing to sneeze at.   Certainly, there are no huge disparities between upgrades and features.  The biggest variable would simply be a swimming pool.

I actually turned down a listing in Village Walk of Bonita Springs because the only difference between the most recent closing and the subject home was a pool heater.  The owner wanted to list the home $75,000 more than that closed sale.  Essentially, they were trying to sell a pool heater of $75,000.

Now imagine that a buyer walks into the home with a $75,000 pool heater, falls madly in love with it and decides to buy it on the spot.  When the bank that is lending the money for that mortgage sends a property appraiser, reality will set in.  The entire sale is put in jeopardy because the lender will only fund the loan if the home appraises.  Should the buyer be getting an 80% financing loan, the bank will only lend money for 80% of the value that the appraiser deems the home to be worth.

So what happens when a home doesn't appraise for the contracted purchase price?  To start with, the deal can fall apart.  If the home doesn't appraise, the buyer doesn't get his mortgage approval.   The financing contingency can be implemented and the buyer can walk away.  If the buyer really wants the home and the seller really wants to sell it, they usually strike some sort of a deal.  In a buyers market the seller usually reduces the purchase price of the home if the seller is motivated enough to sell.   In a seller's market buyers bring the cash difference to the closing table if the buyer is motivated enough to purchase.

Pricing a home properly is essential.  Mortgage underwriting has become more strict with the downfall of the sub prime market.  There isn't a way to "sneak one past" the bank.  Pricing a home above where it can or will appraise is a pipe dream and a waste of both time and money for all parties involved.

*Sunshine MLS 4/20/08