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How do we come up with a fair asking price. Comps are considerably lower than the asking price.

The home we're interested in is listed at $214,000.  1,693 sq. ft, 4 BDR, 2 1/2 bath in nice neighborhood.  Our realto got comps in $205,000 to $210,000 range.  A friend of ours had his realtor look at the house and he pulled comps that were much lower - $189,000 range.  How do we figure out whose comps are the best to go by?
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July 22 2011 - North King St
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Ok, first of all the "Friend of ours had his Realtor look..." usually is bad news. Why? Because that 2nd Realtor might be trying to win your business by implying that THEY can do a better job. Also if you follow the 2nd Realtors advice, and you LOSE the deal... guess who you will blame. The first Realtor and run to the 2nd. So throw that out.

One thing you might not have considered doing is a Frankly CRA, this is a Comparative Realtor Analysis. See what the listing Realtor's track record is. If they overprice 80% of the time by $15k, then you know they are bluffing and you can wait it out. If you see that they sell for 99% of list within 5 days most of the time, then you know it is likely legit.

Also don't just look at a range of comps. Dig DEEP into EACH comp. Was one of the comps a short sale? Is there an upgrade in the new house that you aren't accounting for? Is there a better view that isn't in the comps. Etc. EACH home, one by painfully one. And if you still don't see it... Ask the listing agent to show you. They love to show their rationale. Sometimes you will get from the listing agent the feeling that "well I dont really agree with it, I just did what my client told me to do", then you can strike! 

Or they send you bogus comps... 

But whatever you do, don't be overly defensive and send a 10 page report on why they are so far off. It shows weakness.

Stay strong! I know it can be stressful, just keep in mind it is equally stressful for them

Frank
Broker FranklyRealty.com

PS. Ignore the "the lender won't lend more..." comment.
Appraisers are oftentimes bogus. Do you think it is a coincidence that so many times their numbers happen to come in at the exact contract price. Give me a break. Overpaying and crossing your fingers that an appraiser will be your savior, is the worst advice I have ever heard.
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August 22 2011
Profile picture for SoCal_Engr
"Trust the advise of your agent but ask lots of questions."

That's somewhat oxymoronic.
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July 22 2011
Profile picture for Michael Helton
Keep this in mind, your lender won't lend more than the home is worth. 

Dan, I know what you were trying to say, but the millions of people who had their houses foreclosed on, and the tens of millions who are still totally upside down might disagree with you.

The bank determines what is an acceptable risk for them and if they believe you will be able to make your payments for the term of the loan...regardless of the market price of the house.

The only reason they care what the house is valued at is so they have a resonable chance of recovering their investment if you default on the loan.
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July 22 2011
Look at value and look at the outcome you want to buy a home but you don't want to over pay.  Keep this in mind, your lender won't lend more than the home is worth.  Keeping that in mind.  The seller wants one price and you want another.  Trust the advise of your agent but ask lots of questions. Make sure you are comparing apples to apples.(2 stories with 2 stories not 2 stories with split levels)
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July 22 2011
Profile picture for Michael Helton
In my city normal sales are going at a premium of about 10% (tens of thousands) about the normal comp range.

Also look at landscaping.   I was looking at a house that was a shortsale that was a few thousand above the comps but had about $100,000 in landscaping/pool/trees.  Those sorts of improvements are hard to price and may be worth more to one person than another.
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July 22 2011
Profile picture for sunnyview
You need to ask another agent for a CMA and also ask a list of all houses with your basic statistics (bed/bath, square footage within about 200-500sf, similar quality etc.) that have sold in the last 90 days in your neighborhood and within about .5 mile.

Before you make any decision, you need more information. Ask about days on market, ask about a possible listing price that would sell your house in 60, 90 and 120 days, ask about the specific comps that are being used and ask if photos are still available on the MLS for those houses so you can see for yourself what they are like.

Although there a plenty of good, professional agents, not all agents are competent or truthful. If you get more information for yourself, you will be able to make a better decision about which agent to choose and about a realistic asking price that you feel comfortable with.
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July 22 2011
When an agent (or anyone) pulls comps - it's a pretty subjective process.  I would ask each agent how much time they put into their reports.  Are the just simply pulling these houses off of the MLS based on neighborhood and square footage?  Have they actually been in, or are they familiar with these comps?

I know when I talk to my clients about listing a home, I take the time to actually drive by my comps. Just to make sure you are making a fair comparison.  Maybe one of those houses backs up to a busy street - or has something else going on that makes it more or less desirable.

But when it comes down to it, these reports are your agent's opinion.  You could have 3 different agents/people looking at the data and could end up with 3 completely different interpretations.

Look at the comps - see which ones make the most sense to you, as well as your agent.The most important thing is to determine how much is the house worth to YOU! 

As agents, we try to educate and inform whenever we can. However - after all is said and done, buyer and seller determine the market value on every home when they agree to a price.
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July 22 2011
Question your agent. A good agent would have had that conversation with you when he/she gave you the comps.

A few factors to consider:
1) Is this home a traditional sale, a short sale, or a foreclosure?
2) Were the comps pulled by the other agent traditional sales, short sales, or foreclosures?
3) Did the other agent compare the features and upgrades of the sold homes, or did he/she just pulled the list of solds without analysing in detail?

Keep in mind that with traditional sale, the seller conveys clean title, General Warranty Deed, and can close in 30 days.

With short sale, you should get a clean title - not always, buyer beware - but need to wait for the bank's approval 2-6 month, or longer, only to learn the short sale was not approved, or that the seller did not agree to the bank's terms. 

Foreclosures are purchased directly from the bank and can close in 30 days, but you receive only Special Warranty Deed and there might be Title issues. Not to mention that foreclosures often need some work, appliances, etc.

Always compare apples to apples.
  
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July 22 2011
Profile picture for SoCal_Engr
Remember, "comps" are only as good as the REA - and can be influenced by their personal intent (i.e., trying to get a listing or influencing a buyer to make an offer that will be easy for the seller to accept).

For both set of comps, I recommend talking to both REAs. If it turns out your current REA highballed the comps, then terminate that relationship - as they have already shown that they do not have your interests as their #1 priority.
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July 22 2011

I would speak to your agent about the comps that they pulled and then show the comps provided by the other agent and have them explain why there is a difference.Then from there you should be able to come up with a proper offer.

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July 22 2011
 
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