Tough Real Estate Conversations Need to Happen-Fair Market Value

By
Real Estate Broker/Owner with Signature Mountain Homes and LAND- Asheville 1031 Realty, Inc. 209970

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 ValueAshevile Land Owner Contemplates Sale

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...

 Part 1  

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Show All Comments
Rainmaker
335,288
Agent Aaron Vaughn, REALTOR® Listing Specialist
Capitol Home Team | Austin TX - Buda, TX
The $500 Million Marketing Advantage

Hello: Typo in sixth graph. But you make some excellent points here. I am glad this got featured.

June 12, 2010 08:53 PM #42
Rainer
160,313
Sajy Mathew
Coldwell Banker Select Professionals - Lancaster, PA

Wel thought out and you are doing a great job for your client.  Tough situation w/ the husband's passing

June 12, 2010 10:25 PM #43
Rainmaker
973,783
Sharon Alters
Coldwell Banker Vanguard Realty - Fleming Island, FL
Your Fleming Island Relocation Agents.

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.

June 12, 2010 10:49 PM #44
Anonymous
Anonymous
Anonymous

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

June 13, 2010 01:42 AM #45
Rainer
188,446
Stephen P. Panczak, Sr.
Keller Williams Realty of Palm Beaches - Palm Beach Gardens, FL
Realtor, Property Mgm't, LCAM

Good approach to help assist with separating the emotions along with the business at hand, fair market value and moving ahead...great job!

June 13, 2010 06:28 AM #46
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ASHEVILLE 1031 SIGNATURE PROPERTIES specialists in - LAND,INVESTMENT ACREAGES, AND LUXURY HOMES
Signature Mountain Homes and LAND- Asheville 1031 Realty, Inc. - Asheville, NC
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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...

June 13, 2010 08:20 AM #47
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Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

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.

June 13, 2010 08:21 AM #48
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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...

June 13, 2010 08:32 AM #49
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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...

June 13, 2010 08:34 AM #50
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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..

June 13, 2010 08:38 AM #51
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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.

June 13, 2010 08:44 AM #52
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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...

June 13, 2010 08:49 AM #53
Rainer
109,890
Jenna Dixon
DRA Homes (Atlanta, GA) - Marietta, GA
Assoc Broker, NW Metro Atlanta

Well-written post, janeAnne.  I cannot wait to read part 2 for the seller's reaction and the decision.

June 13, 2010 10:31 AM #54
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

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.

June 13, 2010 12:04 PM #55
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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 800-610-7253 DRE01267479 - Costa M

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.

June 14, 2010 02:27 AM #56
Rainer
44,909
Jenn Neumann Deer
RE/MAX Southern Shores - Surfside Beach, SC
Surfside Beach Real Estate

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.

June 14, 2010 10:03 AM #57
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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

June 14, 2010 10:20 AM #58
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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.

June 14, 2010 10:21 AM #59
Anonymous
Anonymous
Anonymous

As always JaneAnne, you are exactly right.

Arlene

June 14, 2010 09:19 PM #60
Rainmaker
909,853
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

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.

June 15, 2010 08:09 AM #61
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