A potential seller of a large land parcel here in the Greater Asheville area contacted me this past week. She spoke of her husband's untimely death, and the fact that , shortly thereafter, she had agreed to a two-year listing contract. Thus began a number of tough real estate conversations with her. These conversations are the subject of this series.
This conversation centers around -Fair Market Value
BACKGROUND: The widow, who lives out-of-state, now is alone in ownership of a parcel of land in the Greater Asheville North Carolina area. Referred to me as a Land Specialist, she had called to talk about this high-end acreage.
She does not want to part with the Land as it was her husband's "favorite place on Earth.." But her finances after the medical expenses from his illness made it a necessity.
In our first conversation, I explained that we needed to consider certain things about the property in order provide an honest report.
Even in the Asheville mountains, one of the most attractive areas of the country for second and vacation homes and for Land , a price reduction and the possibility of lost property value had to be addressed, as did the urgency of the sale. This would affect the price.
We would need to agree on pricing the Land "RIGHT"- right from the start or lose the window of opportunity. The first step in the process was (and is) to determine the Fair Market Value (FMV). To determine FMV, I began by focusing on COMPS research. My notes follow:
COMPS RESEARCH: (This took a couple of hours to compile and write up ...I made an appointment for a video conference with the widow set to discuss the email as per the information below.)
1. [ link provided] Here is a link to information about a property that sold in the area. Please be aware that this is not an "exact comp" as there are no comparable properties in the area, however, we can extrapolate information from it. The property is just about 6 AC . It sold for $160,000...To get a reasonable estimate, we need to add and subtract features/benefits of this parcel as compared to your 30 AC +/- parcel...Here is the description of that property: [there followed the information described.]
Computation:$26,000 per acre
2. HERE is a HOME [link provided] in the Asheville market on a large parcel of land that sold this past month in [the same eco-community] I will call the Listing Agent on this property to talk about the sale and report back to you on my discovery and recommendations. Again -to get a reasonable estimate, we need to add and subtract features/benefits of this home, find the value per sq ft. and then find the value of the land... Here is the description of that property: [description provided.] Computation : Acreage is priced at about $15,000 per acre.
3. HERE is another property:: [link and description provided]Computation: Acreage is priced at about $20,000 per acre.
PRICING ESTIMATE FOR SALE: $450,000
At this point I continued showing examples of how I computed the FMV, so that in our video conference, the potential seller-client would understand how we arrived at the figures. I would have to have a tough real estate e conversation about how her need to expedite the sale of the land would affect this.
Stay tuned...
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It's a sad situation here where the owner must sell. But if she must sell, pricing is the crucial underpinning to success as you well know. It appears you are working diligently on her behalf.
There is an attraction to the mountains that many of us feel. You do I do living here. So this is a sad fact for your seller. But in the end maybe she will feel relieved
Vickie~
I appreciate your comment and your thought..." ...pricing is the crucial underpinning to success..."
Charlie~
We are hoping that she will sell the land and be able to use the profit from her husband's investment to buy a new Green Built home here in Asheville...stay tuned... =)
Better to set realistic expectations at the beginning to avoid any misunderstaning later in the transaction!
I used to love the smiles on the sellers' faces when I gave them the fair-market value during the good times. But hate doing it now....but all part of the job. Looks beautiful......good luck.
More often than not, sellers have an emotional attachment to their property. This can make an honest price discussion difficult. But in the end, knowing that I have been honest, whether it is what they want to hear or not, makes me feel good about the services I provide. Good Luck!
These are tough conversations to have but determining price is so crucial to a quick sale.
janeAnne, this is great. You make it totally understandable to someone who knows nothing about values in the area.
We think this is a great post. It shows what realtors are like in Asheville. Congratulations on being featured. You deserve it.
Hi janeAnne -- I recently sold two vacant land parcels, both were unique, so even though I have an appraisal background, I recommended the sellers of both parcels hire the best land appraiser in the area, as there are many considerations about highest and best use, adjustments that are unique to land, utilities and a myriad of other factors that while I had a good understanding of, I thought they would be better served. The end result was they ended up netting more because of the appraisals. A win-win-win. This probably doesn't apply to all land parcels, as each property is unique. Best of luck, sounds like this will be an interesting process.
Russell~ How true! Your comment, "Better to set realistic expectations at the beginning to avoid any misunderstaning later in the transaction!"
Karen~ It is a Buyers' Market and that has big implications on many levels as you suggest.
Keisha~Excellent point about emotional attachment. I have found this to be especially true when it comes to land in our beautiful mountains...a cabin by a stream in Asheville is hard to leave...
Tammie~I agree these conversations definitely ARE crucial!
Pat~coming from YOU ... your comment, " You make it totally understandable to someone who knows nothing about values in the area. .." is a high compliment. THX!!!
Carolina~ Thanks!
Chris~!!I totally agree with your suggestion about hiring an appraiser who understands the value of unique land. As I continue this series, you will see your advice is well-taken. Thank you!
JaneAnne, pricing right is the correct thing to do for residential or land. You are serving your client well.
Congrats on the feature. This is an important topic and it is something not all agents can handle like a professional as yourself. Thanks for the series.
I agree with #11.
very interesting and compelling. I want to read the next part!
JaneAnne,
I can't wait to read the next part. I like the way you explained each comp and the value. This is an important topic so I can wait to see how this one transpires.
Gary~ Thanks for the nod. Much appreciated!
Joan~ Coming from YOU this is a great compliment. Thank you.
L or L~ I agree with your agreement on #11 =) it bears repeating"hire the best land appraiser in the area, as there are many considerations about highest and best use, adjustments that are unique to land, utilities and a myriad of other factors..." and THX for this, Chris
janeAnne - she is in good hands with you as her trusted advisor. So you're teasing us a bit - stay tuned. She either understanding and accepting your direction or? stay tuned :)
Miriam~ Stay tuned. I am working on the next phase of this conversation and will explore it soon. Thanks for your interest.
Peggy~ Appreciate this that you said," ...like the way you explained each comp and the value...."
Dear Anna Banana~
That is the challenge...as you say..."She either understanding and accepting your direction or? stay tuned :)..."
If you can be realistic at the beginning at least youa re setting the ground work for open honest communication. they may not want to hear it but they need to know the all the facts. So far this is starting out well.
Hi janeAnn, Always better to have a thorough understanding of the dynamics of a listing. The time you spend now will save time and headaches later. Good luck !
Well, I hope she doesn't fixate on the highest priced comparable sale. Where I work, sellers often gravitate toward the highest comp when the market supports the lowest comp -- and you know that's where the appraisers will go.
Lesley~ Good point you make: "If you can be realistic at the beginning at least you are setting the ground work for open honest communication..."
Bill~ Also a good point: " time you spend now will save time and headaches later..."
Elizabeth~It is hard to lt go when you are so attached to a property not only for the beauty and the memories, but because of the ability to"see" the person you loved most in the world right THERE...so it could be a final grieving process...and I could see how this widow wold want to get the $$$ value she thinks represents the value as she sees it...and...yes...appraisers...
as Chris mentioned, " hire the best land appraiser in the area, as there are many considerations about highest and best use, adjustments that are unique to land, utilities and a myriad of other factors..."
so I am detailing the steps as we go through this collaborative (hopefully) adventure...and I expect that this will be fruitful...although I have to say that my expectations are not always met =)
My sister gave me some great advice. Try not to make any decisions for a year or so after a major upheaval in your life. It's hard to make good decisions when your whole mental scaffolding has been taken down. In this case, although it may be hard for your client to think about what to do, I'm glad you're the one advising her.
You are such a teaser - come on spill the beans! Did she or didn't she!
Unfortunately sellers often fail to understand that the buyers will have NO emotional attachment to the land nor will they care about any difficulties the sellers may be having. That is not to say they are heartless, but they are looking at this almost as a business transaction. Yes, it may be very traumatic that Grandma needs a heart transplant, but the buyers are not going to pay 30% more than reasonable market value for a property just to "help the seller's family out". They will consider how this or that property compares to others that have sold in the area. The fact that the sellers build the patio themselve or raised 6 kids in the home will not figure into the buyers' calculations.
However, it is so hard for sellers to "step back" and look at their homes objectively. Sadly, if they do not, in the end they will likely not reach their goals.
As agents we have to remember that we are not selling the memories, she will take them with her where ever she goes. We just sell the land. Our land prices are holding steady at the same rate per acre as we were selling it for in 2006. We did back slide some, but still better than most of the sellers, who have owned it awhile, paid.
Lots of great comments and you are well equipped to assist her in making the right decision. Usually I would agree fully with Dave the importance of not rushing into a decision after an emotional upheaval but you did mention she was/would be in need of funds. You have a great way of demonstrating how you arrive at FMV which even I can understand (I do residential not land). I hope I don't miss the end of the story and what the appraiser had to say. Indeed, Asheville and area is beautiful and it appears you are dealing with a prime piece of property that developers, investors will find of interest. That's a beautiful picture but I sure could never be the one sitting on that guard rail -- one look down would do me in!
Sue of Robin and Sue
I believe that fair market value is your list price right now, there is no wiggle room anymore. I used to be very comfortable listing 3-5% above MV not anymore.
Setting the realistic expectations, can definatily avoid future issues!
It is a sad situation when the owner is selling after the death of a spouse. But sounds like you did a great job providing her with information re: fair market value.
Tough issues... and good advice on the topic. Thank you for sharing this post.
Thank you for the "good read" today. I really enjoyed it. Sad....yes, but being truthful with set you free. The seller needs to know up front what to expect, within reason, and go with it, good bad or indifferent!
Patricia/Seacoast NH
It is sad this widow must sell. Yet, prices are relative. If she is hoping to purchase something else, than the low price she is now getting for her current property, is likely to present a buyer opportunity for anything she may acquire - Low price for what she sold; but low price for what she purchases. Again, it's all relative.
ps....I have bookmarked this for a friend.
Thanks again!
Patricia/Seacoast NH
Hello: Typo in sixth graph. But you make some excellent points here. I am glad this got featured.
Wel thought out and you are doing a great job for your client. Tough situation w/ the husband's passing
janeAnn, my stepmother received similar advice as #30 when my father suddenly passed away leaving her to handle their business ~ make no changes for 6 months (not a year) and it worked very well. Of course, this woman's situation may require more immediate action, and she may not really need such a large parcel without anyone to help her care for it.
Good advice on such a tough topic. Please don't leave us hanging keep us updated. I will keep an eye on our blogs . thanks for sharing
t
Good approach to help assist with separating the emotions along with the business at hand, fair market value and moving ahead...great job!
Dave ~at #30) made a wise observation: "It's hard to make good decisions when your whole mental scaffolding has been taken down."
We-not only as a group of people with a special knowledge of real estate, but as caring individuals aware of the vulnerability of our clients- can express understanding by providing thoughtful context for the decision-making process...
IaneAnne I am looking forward to part 2. It is so important to thoroughly discuss with the clients expectations as well as how you arrive at the numbers. I too can't wait for the outcome.
Anna~ Check back for the "next step" s o o o o n...=)
John~ Your example.... "Yes, it may be very traumatic that Grandma needs a heart transplant..." (used in making the point that buyers are not emotionally attached as sellers may be) leads me to expand on the theme of the place of human compassion in the practice of real estate...
Gwen~ your point: " .. we have to remember that we are not selling the memories, she will take them with her where ever she goes..." is one that this client will appreciate hearing...and one I will underscore during the conversations to come...
Sue - of Robin and Sue~Thank you for your thoughtful comment. I can hardly wait to hear what the appraiser has to say as well...IF she decides to invest in that choice...stay tuned...
Michael~Good point about FMV
Chris~ Setting realistic expectations is good advice, especially in challenging situations such as this...
Sharon~ Thanks for your kind words..
Rob~ I imagine that even out there in Kansas, you run into situations such as this.
THAT got me thinking:: How one deals with KS tornadoes, must be similar to how one deals with a tornado of grief running right down the middle of your heart...
Patricia~ your point: "being truthful will set you free..." is well-taken.
Myrl~ I am going to emphasize your point, " It's all relative..." as I continue with this story...
Patricia~ You are most welcome! and thank YOU!
Agent Aaron~ Thanks for the good eye.
Sajy~ Each situation is unique, and requires that kind of dedication. As you imply...
Well-written post, janeAnne. I cannot wait to read part 2 for the seller's reaction and the decision.
It can be hard to have that frank discussion, but you MUST DO IT.
I had a seller call this week and tell me what he wanted to list for. I explained the homes on the market, the competition out there for his price range, and what has sold (and not sold).
He ignored the data. I emailed him again, in writing, explaining what it is likely to sell for (not sit) today.
He ignored my data again, and said if I didn't want to list it for what he wanted, he'd go elsewhere. I let that one go ... but it just kills me that someone WILL LIST IT for what he wants and it'll either sit forever, or he'll take a lower offer later.
Alright. . . now you'll have all of us on the edge of our seats for your next installment. Nicely done.
As to pricing, this is so important and needs to be done correctly.
Great post! Sellers need to be realistic and we can help guide them by showing them what price needs to be - some of them just need more time than others to realize how right we are about price and what needs to be done to get a property sold! Good luck and sounds like your seller is in great hands.
Sharon~Good point about each situation being unique.
Jennifer~ So true...it is important to focus on the client's expectations and make sure we all get on the same page.
Jenna~You will be surprised when you read about the seller's decisions...or maybe NOT
Erica~
timing...and expectations...Here is something to talk about...I hope you do a post on it soon...you commented..." but it just kills me that someone WILL LIST IT for what he wants and it'll either sit forever, or he'll take a lower offer later.
As always JaneAnne, you are exactly right.
Arlene
Convincing a seller what the true market value of their property is one of the most difficult tasks in Real Estate especially when there are false expectations.