There are two market conditions that have recently come into play that should be given serious consideration.  They are:

1. Price volatility
2. Client flexibility

After years of dropping prices, markets have not only stabilized, but in many cases are rapidly increasing.  In other cases, foreclosures and short-sale activity continues to have a significant adverse impact on prices.  Are prices going up?  Are prices going down? Who knows?  Everyone seems to be a bit confused.

The second condition is actually beneficial to the real estate market.  It involves buyer and seller flexibility.  After years of pent-up buyer and seller demand, sellers are finally willing to negotiate price and buyers are once again willing to pay a price that is consistent with the value of the home.  The only issue becomes what is the value of the home?

One of the most effective next steps that can be applied to both buyers and sellers is getting an appraisal.  An appraisal will address both of the above conditions.  It not only will help address price volatility, it also reinforces the flexibility that both buyers and sellers are willing to apply to their situations.  Consider the following:

For Buyers

• If a buyer is stuck on a low price or is afraid of paying too much, an appraisal can minimize their risk of making a mistake by removing uncertainty as to value.  Better yet, if the appraisal indicates an increase in value, that increase in value can be used to create urgency by showing the buyer that waiting will cost him a lot more money.

 

For Sellers

• With positive reports published weekly about real estate activity, an appraisal can help remind a seller that as the owner of property, they carry the risk of price volatility.  In most cases a buyer won’t pay more than an appraised value because they don’t want to assume the risk of loss held by the seller.  An appraisal with this argument can be especially helpful as a price reduction strategy if a listing is overpriced, or as a price negotiation strategy if a seller is resistant to accepting a good offer.  It is not recommended that these arguments be used prior to a listing being signed as part of a listing presentation.

 

Finally, it’s also important to remind your sellers that most buyers, even cash buyers, are securing mortgages because of the low interest rates.  A sale contingent upon mortgage approval will give the buyer an automatic out if the appraisal is low.

There you have it! Apply an appraisal strategy to price volatility and client flexibility.