Justifying Your Low Offer? Price Per Square Foot CMA’s Are Misleading
Recently, I received three offers on Destin Florida area real estate listings that were quite low. In each case, the buyer’s agent attached a comparative market analysis, called a CMA. The only problem was that these so-called analyses only used “price per square foot” as a value determinant. The agents chose nearby homes, plugging their sales prices into an online program, and spat out the results of average price per square foot, multiplying that figure by the square footage of my listing, thus “justifying” their buyers’ low offers…. One agent stated the buyers were afraid of paying any more, as they felt the property would not appraise. Correction – he misled the buyer into thinking that is the only way homes are valued. That is just plain wrong.
Home valuations are more than just plugging in price per square foot, just ask any appraiser (and I did!). Here are other factors that are considered when appraising real estate:
1. Land Value: Is the lot flat, built into a cliff, larger, smaller, wet, backed up to commercial property, adjacent to state forest, a highway, near a land dump, on a cul-de-sac, on a lake, with a water view, etc. By the way, if it has a water view (or mountain view or any cityscape view) how does the view corridor compare with others?
2. Concessions: Did comparable sales include seller credits such as furniture, cars, boats, free rental time, closing costs, etc.?
3. Quality: Are the building and finishes superior or inferior? Are amenities superior or inferior? Are there quartz counters, upgraded baths, tile or carpet floors, paneling, popcorn ceilings?
4. Condition: Does the comparable or subject home need work? Here is another example: A home built 20 years ago that was gutted and remodeled may be worth more than a ten year old home with no improvements and poor maintenance.
5. Age/Number of Baths/Garage/Parking
6. Amenities: What are the adjustments for porches, decks, fences, pools, irrigation systems, patios, fireplaces, docks, boat slips, etc. If one property has the same amenity, is it equal to the subject property? Reference quality and condition.
I tried to gently explain this to one of the buyer’s agents. He didn’t understand and another agent wrote an offer that was significantly higher. The original agent wrote an offer for $150 per square foot, based on the plug-in computer program he used. The couple that entered into contract paid $170 per square foot, and paid about 10% more than the original agent contended the home was worth. It was a flawed analysis, it misled the buyer and they lost a home.
By the way, the house appraised.
It’s Wendy… It’s Sold!
Wendy Rulnick, Broker, Rulnick Realty, Inc.
Call 850-650-7883 ext 204
Email Wendy: [email protected]
Wendy Rulnick, Broker, sells real estate in Destin, Santa Rosa Beach, 30A, Miramar Beach, Seagrove Beach, Watercolor, Sandestin, Seaside, Rosemary Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Florida.
