Posts Tagged ‘Price’

Real Estate: When Price Fails, Negotiate

August 8, 2014

14Aug08 New Pix-2

(Image Credit: Google Images – en.wkipedia.org)

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WHILE WAITING IN LINE AT THE POST OFFICE A CONVERSATION WAS OVERHEARD between two men who evidently knew each other. The younger man (who we’ll designate as “Young”) said he and his wife were looking to buy a home since the current market appeared to present an optimal time for the lowest home prices. He said they located a great home in a terrific neighborhood with a nearby playground for the kids but lamented the price was still too high for their income.

The older fellow asked if Young made an offer at a price he and his wife could afford, to which Young said “No,” explaining the real estate agent told them the homeowner might entertain an offer but Young declined to do so because any offer he made would have been significantly below the asking price and rejected. Really? How would Young know his offer would be rejected in the absence of submitting it?  Couldn’t there have been a chance the offer would be accepted … or that a tolerable counter offer may be presented? Of course!

Yet, walking away without making an offer guaranteed Young would have no chance to purchase that home. Would it not have been better to consult with his attorney and accountant to fashion then submit an offer? We think so. After all, the worst that could have happened was a rejection.

Recently we’ve heard real estate salespeople mention the reluctance of potential buyers to make an offer on a property that appeals to them, preferring instead to walk away. But why?  Maybe there are theories about buyer resistance to make an offer or negotiate a price, though based on what we’ve seen and heard such reluctance seems to stem from the evaporating art of disciplined and cool-headed negotiation.

Perhaps parties to potential transactions should be reminded rejection of an offer should not be emotionally digested. A better reaction would be examining reasons for the rejection and seeing if another offer is possible as an evolving opportunity that is part of the back- and- forth process from which a seller wants as much money for his/ her property as possible, while a buyer wants the best possible bargain. Both positions are valid and its constructive old-fashioned negotiation that builds a bridge between them.

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Need consulting, coaching or problem troubleshooting regarding other single-family or multi-family housing issues? We’ll be pleased to help you. Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

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Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation. Statements and/or opinions of guest authors may or may not reflect those of Inhouse Corporation.

Looking At The Real Estate Appraisal

April 27, 2014

  Appraiser 0058

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AN APPRAISAL OF SPECIFIC REAL ESTATE USUALLY is more dependable than a property tax assessment or a real estate agent’s opinion of value. And it is useful when establishing an asking price. However, being more dependable does not necessarily mean it is infallible. After all, an appraisal is a value estimate calculated through a generally accepted procedural methodology that in practice is partly systemic and partly reflects the skill of the particular appraiser.

Viewed in this way an appraisal report should be read thoroughly. Unfortunately, too many just look at the final value then become glassy-eyed when attempting to read the rest, either skimming over or ignoring the balance of the report which often can be a mistake.

This was clearly illustrated when the seller of a unique parcel of commercial real estate was very displeased and uncomfortable with its appraised value. Since the real estate tax bill indicated a value of $750,000 the seller felt confident the appraisal would be somewhat near that amount. But when the appraiser estimated the value as $575,000 we were contacted to review the situation as well as the appraisal report.

To be placed on the market was a one acre parcel encompassing a large old concrete structure which was rented by an entity not concerned with appearances or foot traffic. Although situated along a busy highway in a retail zone, the building’s unappealing architecture, unconventional construction and odd configuration greatly hindered any cost-effective renovation/ remodeling compatible with most commercial uses.

Analysis indicated the property’s uniqueness essentially precluded an ability to cite comparables. To compensate, the appraiser strove to meticulously detail the path followed to value. Included were a cost-approach analysis and a discussion of desirability in the market. In the end, the appraiser determined the building lacked any desirability, had no value whatsoever and should be demolished, the cost of which decreased the value of the underlying real estate.

While we concurred with a good portion of the appraiser’s reasoning, we found one important fact had been overlooked ― the building was rented and producing significant cash flow. Accordingly, the building had value under the income approach, which value the appraiser ultimately acknowledged had not been considered. When the appraisal was eventually adjusted to factor that data into its calculations the property value escalated to slightly less than $700,000, an amount agreeable to the seller.

The bottom line: Read the appraisal completely.

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Need consulting, coaching or problem troubleshooting regarding other single-family or multi-family housing issues? We’ll be pleased to help you. Visit us at the Inhouse Corporation website or contact us at inhouseco@aol.com

***************************

Blog Terms of Use and Disclaimer: The purpose of this blog is to promote awareness and general discussion of the presented topic. Use of this blog shall be the reader’s agreement this blog is not a substitute for the advice of a qualified professional and each action that may be taken shall be under the specific guidance and oversight and/or performance of a professional qualified in the subject matter. If you have a question or want assistance with a featured or related matter please contact us at InhouseCo@aol.com (include the blog article title on the subject line). Links, references and credits in this blog are for convenience only and are not endorsements by the author or Inhouse Corporation. Statements and/or opinions of guest authors may or may not reflect those of Inhouse Corporation.