Bad Agents. That’s right – bad real estate agents. Too many who don’t understand how to properly price real estate or those who allow the seller to guide the value. It never makes the lists going around when written by Realtors or lenders and is overlooked so often, most people never even consider the possibility. Unfortunately, it is the case far more often than is the case for a simply bad appraiser. If a home is overpriced, it never has a chance of making it through the appraisal process. It doesn’t matter which appraiser does the job, you can’t just make up numbers, although many agents seem to do just that. That price just “felt right.” Real estate agents are supposed to be trained in how to price real estate, just like they are supposed to be trained in how to measure a house. They use the over-simplified formula of price-per-square-foot. The problem is they take the sqft details from public records who never go inside any house, and the sqft information is wrong more often than it is right. The myth of tax departments having the “Official Record” of square footage is simply false. There’s no such thing. Maybe it’s only 80, 90, or in too many cases between 200-500 sqft off. With the prices of real estate these days we are talking about huge differences. I have a ton of examples where a home is overpriced between $60-90,000 based on nothing more than using the wrong sqft data. When they take the accurate sqft info, and then input that information into their all powerful PPSf formula, guess what – the value comes in pretty darn close to the appraisals.
But, the public never hears about that part. There is an unwritten rule in the real estate industry – we don’t talk about square footage. But maybe they should, because they cheat homeowners out of time and money every day, all across the country. Yes, size does matter. Ask your agent if they measured your house and why it matters…
Appraisers are still getting a bad rap when it should be a little better known that starting with a fair value gives you a much better chance of not having to worry about the appraisal process. If the value is done fairly, you’ll never have a problem with an appraisal. Imagine that!
Whether the culprit is using bad square footage data or one of a dozen other problems with the real estate education process, sooner or later someone needs to scream REAL ESTATE REFORM! Not appraisal reform, real estate agent reform. The problem starts far too often at the beginning of the process, not at the end. Every valuation, at least in part, is based on personal opinion. Appraisers have to use facts to prove their opinion – agents do not. That is a problem waiting to happen. Maybe agents should have to provide lenders with the process they used to price every home. That would be interesting!