The New Dangers Of Overpricing

Many sellers just don't seem to believe real estate agents who present lower than expected figures when estimating home values in today's falling market. Invariably, sellers look at the Comparative Market Analysis (CMA), glance at the comparable homes (comps) used to determine the price, and inform the agent that they want or need to get a higher price when selling their home.

Sellers who deviate from the suggested figures used in the CMA are usually making a mistake. Here's why ...

More and more mortgage companies are now demanding that the comps used to determine property value be no more than 90 days old. It used to be that agents and appraisers could use comps that were from 6 to 12 months old, but as prices have fallen mortgage companies have determined that those older comps lead to an inflated value for the property. Today, 90 day old comps appear to be the norm when mortgage companies ask appraisers and agents to support their valuations.

In addition, mortgage companies are demanding more extensive data about local listings, pending sales within an area, and the ratios between listing and sales prices. If these figures do not meet the lenders underwriting requirements, they may elect to not fund the mortgage for the contracted price. When this happens, sellers are often forced to accept lower prices for their homes even after the contract has been signed for a higher amount.

These 90-day appraisals and CMA's are forcing sellers to lower their asking prices as the value on residential real estate continues to fall. It does a seller no good whatsoever to price a property higher than the CMA value only to find out after months on the market that the property's value has become less over time, and that the buyer's mortgage company will not make the loan for the contracted amount. When this happens, agents like to say that the property "did not appraise". When a property does not appraise, there are few options available:

• Request a new appraisal and hope for a higher figure (which is highly unlikely);
• Ask the buyer to pay the difference in cash (an even more unlikely scenario);
• Agree to the lower price and sell the property at a lower price than that originally contracted (the usual thing);
• Call the deal off and put the property back on the market (the least acceptable option).

Property always sells for its current market value. No more. No less. The reason is that mortgage companies have become the ultimate arbiters of property value because they control the money. Sellers can ask whatever they want and sometimes a buyer will agree to pay it, but sellers will only get the appraised value because that's all the mortgage company will give to the buyer. Remember, if the buyer can't get the mortgage he can walk away from the sale and get his deposit money returned. Wording to that effect is in the contract.

So, what sense does it make to overprice a property? It makes no sense at all because you can't sell it for the overpriced figure.

Here's something to think about if you are a seller. If your house has been on the market for over 90 days, and if you priced it at a figure higher than the one in the original CMA that your agent prepared for you, ask your agent to do another CMA using only 90-day sold properties in your area. Then, re-price your house so that the new CMA number is your top dollar figure. When it comes down to it, that's all the mortgage company is going to loan on your property and that's all you're going to get for it no matter what you're asking or no matter what the contract price is. You might as well get your price in-line with today's market value, sell the house for it's current value, and get on with the rest of your life.

For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

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