How do i go about selling my home for a little over the appraisal, due to future value?

Asked by Jason, Shoreline, WA Wed Sep 19, 2007

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23
Kim Harris, , 98033
Wed Sep 19, 2007
Easy. You sell it in the future when "future value" becomes present value. Was this a riddle?
8 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Wed Sep 19, 2007
I think we're getting a little overzealous here folks. Ute, I know there has been a lot of drum-banging on other threads about spam posts and solicitations, but let's give new posters the benefit of the doubt before immediately questioning the validity of their response and/or intention. I found Kim's response to be a witty response to a question that is asking for it. Going way off topic here, people are throwing themselves off bridges about alleged abuses and scandal on the boards (Patrick's exile). Let's get back to some civil discussions about Real Estate. Sorry to use your thread to address a larger issue, Jason.
3 votes
Trulia Roger, Home Buyer, Alameda, CA
Tue Sep 25, 2007
Folks,

Seems I can't go on vacation for a week without all heck breaking loose :)

I appreciate everyone's candor and personal emails sharing your concerns. Please rest assured we're working on new features to deal with flagging and thumbs up/down abuses, and we'll be rolling them out shortly.

I have reviewed various threads and haven't found anything that indicated particularly bad behavior. I do wish the self-promotion were toned down a bit, and I trust this community to self-moderate--you've all done a great job calling people out, and I trust they'll understand what the boundaries are.

I will review our database for voting patterns and take action if necessary.

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Cheers!
2 votes
James Hsu, Agent, Bothell, WA
Wed Sep 19, 2007
You and any agent that represents you can do everything in the book to market and advertise the property, but as Jeannette said, buyers of improved properties (ones that have houses on it) usually are only willing to pay around the current market value for it.

There's also the problem of the appraisal. Let's say you had your house up for 1 million even and the appraisal was only $900K, ... lenders will only lend on appraised value or sale price, whichever is lower. Then you and the buyer have a problem. In order for the buyer to buy the house at 1 million, they'd have to fork over the $100K difference out of pocket....on top of whatever they were going to put as a down payment for the loan. Even in the standard purchase and sale contract it says that if the appraisal comes back less than the purchase/contract price, then the buyer may terminate the deal unless the seller pays for another appraisal and it comes back justifying the original price, or reduce the sale price to match the appraisal (or re-appraisal whichever is higher).

So not only do you have the hurdle of convincing a buyer to pay over market value based on its potential value, but you also have the lender to deal with. Now, ..if you are ...as your question states..only pricing it a little over appraisal ... a different appraiser may find in their report that the sale price is justified and this whole part of my answer becomes moot.

Bottom line, it will only sell for what a willing and able buyer will pay, ..and most buyers won't want to pay based on a potential value unless there are clear and obvious things that the buyer can do to the property to drastically increase its value (ie,...if the current house on the property is ready to fall down, ... tearing it down and building a big house could double the value of the property...in that case, a buyer may be willing to pay a small premium for that opportunity).
2 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Wed Sep 19, 2007
In a slow market, you don't. If your market is like mine, with an abundance of properties to choose from, why would a buyer pay more than the house is worth today? If the house happens to be worth more down the road, that is part of the attraction of purchasing a home. The buyer will want to be rewarded for that shrewd investment, not pay you for the speculative return. As others have mentioned, unless you own a truly one-of-a-kind property that is irreplaceable, where you can essentially name your price, buyers will just head down the road to find a better deal. Prices are being reduced left and right in many markets, so the overpriced listing has absolutely zero chance of competing.
1 vote
Samuel Hilbe…, , Woodinville, WA
Wed Sep 19, 2007
Jason -

I'm going to have to agree with most of the other people's responses so far here. A home in this price pointt already takes the correct buyer coming in...and finding someone who will pay over what the market is currently at will be even more complicated.

Currently the market (even in Seattle...one of the better national market) is slower and buyers are negotiating more and spending more time looking for the perfect home at the perfect price. The higher you price your home the longer it will sit...

If you price it too high you may find that you have virtually no interest in your home. This could hurt you even more in the future when you decide to get more serious about selling it "now." When buyer's see that your home has been on the market for 100+ days in the past year or two...they really begin to think that there is either something wrong with your home, it isn't priced correctly, or at least that you are likely desperate to sell and they can throw in a very low ball offer. You lose much of your negotiating power.

Really, the key to selling your home is pricing it right to sell now...not later. You should work with a realtor to decide what your expectations are on amount of time to sell and what you need to get out of your home. By going through current market and needs with a realtor you can really get a sense of how to price your home.

Be careful about listing a home at too high of a price...it could hurt you in future sales efforts of the home.
Web Reference:  http://www.agentsamuel.com
1 vote
Patti Pereyra, , Chicago, IL
Wed Sep 19, 2007
Hi Jason:

Short answer: You can't

Consumers are willing to pay what the market bears NOW, not what the market WILL bear. And even then, these days, not even current market value is an indicator of what a consumer will pay. Add to that the difficulties in the lending industry (i.e., will a lender really fund a purchase price over appraised value?), and it is even more impossible.

And let's say it was possible, because we can't accurately predict what future value will be, how would you then accurately price your home accordingly?

Normally I'm all about thinking outside the box, but there are too many obstacles that are very real.

I agree with Ute, unless there is some desirable hidden gem you know about your property that can be proven will cause a major appreciation in the near future, and some investor is willing to play a surplus for that, it ain't gonna happen.
1 vote
Mark Bensadon, , Seattle, WA
Wed Jan 9, 2013
Depending on the property value, and the current market, the appraised value will only lend insight on a systematic valuation of the property. There are other factors that would come into play when trying to market a specific property. In reality, "future value" will never come into play, as no one will pay more for what they think "might" happen.
0 votes
Courtney Coo…, Agent, Seattle, WA
Mon Jun 2, 2008
Hi Jason -
There have been some heated answers on this. Although I am not completely clear on the exact question here, I have to say that I would never plan on using an appraisal to determine market price. Appraisers tend to make sure that the value is there and might not be focused on actually marketing a property so the list/sales price could be completely different. This also will be even more true depending on when you got the appraisal.

The important thing to do here is to hire a full service REALTOR because this is no time to mess around with FSBO or discounted services - the market is tricky out there and you really need someone working for you. The good news is that you live in Shoreline and Shoreline is a great market.

Good luck!
0 votes
Patrick Beri…, Agent, Seattle, WA
Sun Jun 1, 2008
I guess I don't understand the intent of this question. This might be a FSBO trying to come up with a list price for his home? If you live in Shoreline you know that homes are spending a lot of time on the market there so your pricing needs to be in line with what the market is currently doing. Don Tepper had a good answer regarding a purchase option, but I don't know if this seller wants to do that. Keep in mind,, Jason, that appraisals typically run high and aren't usually a good indicator of market value. Your best bet is to get a CMA from your agent.
0 votes
Charlie All…, Agent, Seattle, WA
Thu May 29, 2008
In this market if you want to sell your home you need to be compelling. What are the homes around you SELLING for and how does yours compare. How old is the appraisal and what was it done for? Make sure your home is in perfect shape and your photos are professional when you go on the market and the price will take care of itself.
0 votes
Don Tepper, Agent, Burke, VA
Tue Mar 11, 2008
I loved Ardell's answer: "Easy. You sell it in the future when "future value" becomes present value."

Beyond that, though, there are some techniques for doing that. Consider a lease-option, or even a straight option. In simplest terms, an option allows you to lock in a price today, and gives you the right to purchase at that price at some point in the future.

Now, I'll acknowledge that in a declining market it's difficult to persuade someone to pay more than a property is currently worth. Still, to take an extreme example: Consider a community in which houses were selling for $200,000 in 2000, and $400,000 at the peak in July 2006. They're now selling for $275,000. Fair enough?

Suppose the owner of one of those now-valued $275,000 houses said: "I'll give you an option to buy this house in 7 years for $305,000. The option will cost $1,000 and, if you buy, I'll credit the option fee to your purchase price." The seller wants a 10% premium--10% above the current $275,000. And I can lock it in at $302,500 for up to 7 years for $1,000. Honestly, I don't know for sure what the house will be worth in 7 years. But that strikes me as a pretty good deal. I'm betting $1,000 that a house will go up in value by 10% in 7 years. Not everyone would go for it, and that's fine. But some people would.

Now, as you adjust the numbers to be a bit more aggressive--say a purchase price of $330,000 in 5 years--a 20% gain in a shorter time frame--you'd get fewer takers. But that's still a reasonable gamble, for many people.

You can, if you want, couple that option to buy with a lease. Rent the property at fair market value. Or rent it at slightly above fair market value, with the excess being credited toward the purchase price. Now, I know some Realtors here really don't like lease-options. The argument is that if you want to rent, rent. If you want to buy, buy. For most people, that's good advice. But lease-options do make sense for some people who'd like to lock in a price, clean up their credit, and save for a downpayment.

Meanwhile, the question here was from the perspective of an owner: How does he sell for a little over the appraisal, as he put it. And Adelle had it right: Sell it in the future.
0 votes
Rob Graham, Agent, Seattle, WA
Tue Mar 11, 2008
You can haggle over what price you want to set for your home but the truth is that if the house is properly exposed, the market will determine what your home is worth. Not you or your agent.
0 votes
Patti Gifford, , Burien, WA
Mon Mar 10, 2008
Do you want your house for sale? Or do you want your house to sell? Market conditions determine the price of your home. In this market over pricing is not advised. However, you can make sure you have done all the right things to make it the best house for the price.
0 votes
Joanne Sterl…, , 91202, 90027, 90039
Tue Sep 25, 2007
I think Kim's answer was most succinct, and correct....In the real estate world, there is no
"Tomorrow."
Joanne Sterling
0 votes
Ardell Della…, Agent, Kirkland, WA
Sat Sep 22, 2007
Actually "Kim's" response was from me and logged in as him in error. We use the same computer at times.

As to the snarky response on the 3 thrumbs up and immediate TU response, get real. We didn't even notice it posted as Kim let alone run around giving ourselve's TUs. Your "we're watching" whacko response is creepy.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Wed Sep 19, 2007
Kim,

cute answer.. So few words and makes so much sense. I like that. .

Sylvia
0 votes
Ute Ferdig -…, Agent, New Castle, DE
Wed Sep 19, 2007
Wrong answer Kim and how did you get a TU so quickly. Don't think we are not watching.
Web Reference:  http://www.go2kw.com
0 votes
J Lo, Home Buyer, California Glory, Brentwood, CA
Wed Sep 19, 2007
I like to think of this question as "tongue in cheek"... Jason, please don't be offended - but it just ain't happenin'.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Wed Sep 19, 2007
Agree with the other agents. Unless this is a truly unique house and/or property on a great location; and you are the only one on the market and you have a lot of time; otherwise, probably not ,

My question for you is to present that you are buying a house, will YOU pay more than the appraised value or, rather, market value, for a house due to future value? If so, what kind of property are you looking for and what kind of tolerance do you have, how high will you go, and how far in the future are you looking at?

If you can truthfully answer this question pretending you are buying the house, then you might have your answer there.

Sylvia
0 votes
Anna Pintane, , Santa Rosa, CA
Wed Sep 19, 2007
You may have a difficult time selling a property above appraisal value. Lenders will have an appraisal completed prior to close of escrow and the buyers wont be able to get a loan for the property. Unless the buyer has cash it's probably unlikely.
0 votes
J Lo, Home Buyer, California Glory, Brentwood, CA
Wed Sep 19, 2007
You can actually put any price tag on a home you want. The real trick is getting someone to pay for it. But a top salesman once said, "there's a buyer for everything"... and even in the toughest times this is true.

I can date the person who spoke those sage words by adding the fact that they didn't have to contend with really really bad publicity and constant negativity from the press....

I like your approach (though it will take some nerve & patience) - you could be on the market for a very long time based on a "future" selling price.... people generally like to know they will be building equity in their home - not buying into it.
0 votes
Ute Ferdig -…, Agent, New Castle, DE
Wed Sep 19, 2007
Jason, I am wondering why you think that the future value will be up for your property. I mean eventually real estate will go up again, but unless it's in the near future, nobody will pay you more because the value might go in the future. Is there anything unique about your property (zoning may change soon to allow for other uses)? Without knowing more about your situation, I would have to say that trying to get someone to pay above appraised value in the current market is next to impossible. You'll be lucky if someone is even willing to pay appraised value. If you provide us with more detailed info, I'll be happy to reevaluate my answer.
Web Reference:  http://www.go2kw.com
0 votes
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