Jim - well SURE she could be wrong. I mean, she’s human and even realtors do make mistakes!
Seriously though … I would bring your findings to her attention. Ask her straight up … why do you come in there when I’m seeing prices here? Perhaps she knows something about the property that you don’t.
Asking her is where I’d start. If that doesn’t solve it - I’d take a much closer look and go with what I felt comfortable with. (leaving myself as much room as I could obviously.)
Can Realtors underestimate a home’s value? - Posted by Jim Beavens
Posted by Jim Beavens on June 08, 1999 at 17:48:42:
Once again I’ve posted an unnecessarily long-winded question below with way too much info that nobody wants to sift through (and I don’t blame them). So I will condense my question into a more agreeable form:
I’ve found a vacant fixer house on the other side of town from where one would traditionally find fixers, in a higher-dollar area. The listing agent said that comps were all over the place, and the best she could do was narrow the after-repair value down to $169K-$189K. When I pulled some comps myself, I found 3 very close recent sales that range from $220K to $250K. I’ve driven through the immediate area and collected flyers from other houses for sale, and not one is asking less than $220K.
Whenever getting comps from a realtor, I expect them to be high, and base my offer on my own estimate of the area. But the fact that the realtor seems to be estimating too low has thrown me for a loop. When I work backwards from an ARV of $220K and come up with an offer that works for me, it’s closer to the listing price than any other property I’ve looked at. So now I’m second-guessing myself and getting nervous because I’m afraid I missed something.
I was just wondering if a Realtor could be this clueless about an area she was selling a house in (she has several other junkers listed over in the lower-income area; this is the only one on the west side).
Are you sure that your comps ARE comps. In the higher end homes, square footage and condition are the king and queen of valuation, (assuming location is equal). The listing broker ought to know that, so if those factors don’t explain it, then perhaps it’s seller motivation. How long has it been on the market? Is the seller living elsewhere and paying on two big mortgages? Who knows? Nothing is carved in stone in this business, so sometimes it’s pay your money and take your chances. One word of caution though. A $220k house for $160k sounds like a deal, but only if repairs still leave a very hefty cushion. You might be sitting with it for a while too.
Sure, a realtor can be way off. What I might do is look at the flyers of the homes you pulled - and call one of these realtors for a comp! If you see the same realtor on 3-4 signs, then definitely call that realtor - they are obviously “farming” that area and will be much more knowledgeable than one who does not specialize in the neighborhood. Say you are interested in that neighborhood, and ask them to give you some recent sales in the area. If the house you are looking at is listed, ask them to do a CMA on it for you. It doesn’t matter if someone else is listing it - any realtor can work with you. And using one who is familiar with the area is much better.
