Pricing the Property
While it is the responsibility of the broker to advise and assist, it is the seller who must determine the listing price for the property. Because the average seller does not have the skills needed to determine a market-based listing price, brokers must be prepared to offer their knowledge and expertise.
Brokers can help sellers determine a listing price for the property by using a comparative market analysis (CMA). A CMA analyzes properties similar to the subject property in size, location, and amenities. It is distinctly different from an appraisal report offered by a licensed appraiser that is based only on an analysis of properties that have actually sold.
The CMA is based on :
- recently closed properties (solds),
- properties currently on the market (competition for the subject property), and
- properties that did not sell (expired listings in the area).
Sold prices represent what buyers have been willing to pay for similar properties in the neighborhood. Very often, the expired listing prices are those prices that buyers have not been willing to pay for a property similar to the subject property.
Market Value
Market value is the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market.
Current asking prices of current, similar properties on the market indicate the trend: asking prices lower than the “solds” indicate a slow or declining market. An optimistic market is indicated when the asking prices are higher than the “solds.”
Although a CMA is not viewed as a formal appraisal, the broker uses many of the appraiser’s methods and techniques in arriving at a reasonable value range.
The figure sought in both CMAs and appraisals is the property’s market value. Market value is the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. A CMA estimates market value as likely to fall within a range of values (e.g., $335,000 to $340,000).
While it is the property owner’s privilege to set whatever listing price he chooses, a broker should consider rejecting any listing in which the price is substantially exaggerated or severely out of line with the indications of the CMA or appraisal. These tools provide the best indications of what a buyer will likely pay for the property. An unrealistic listing price will make it difficult for the broker to properly market the seller’s property within the agreed upon listing period. Furthermore, a buyer may have difficulty obtaining financing because the property did not appraise for the sale price.
Information Needed for Listing Agreements
Once the broker and the owner agree on a listing price, the broker must obtain specific, detailed information about the property. Obtaining as many facts as possible ensures that most contingencies can be anticipated. This is particularly important when the listing will be shared with other licensees through an MLS, and the other licensees must rely on the information taken by the listing broker.
