[Music]
Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in
Greenville South Carolina all about real
estate here in the upstate the greater
Greenville area whatever you want to
call it I'm your host Stan McCune and I am
a realtor here in Greenville South
Carolina in case you didn't know that
and you can find all my cont information
in the show notes hopefully I remember
to put it in there every now and then I
forget to if I do just look at
another show it will be in there my
contact information will be in in the
show notes hopefully in this one
hopefully in all of them but reach
out to me at any time with any of your
real estate needs or if you just want to
shoot the breeze about a podcast I am
happy to do that as well I will talk
your ear off about real estate if you
can imagine
if you've never spoken to me before
and you hear me just talking to nobody
about real estate as I do on this
podcast imagine the way I am when I
actually am sitting down and talking
with someone about real estate it can go
on for a long time and that's just the
way I am but I enjoy it I love it I I
love what I do I love real estate and
if I can help you in any way just let me
know and so my contact information is
there in the show notes for you and as
well just just as a reminder any
reviews that you guys can give me on the
show any ratings anything like that is
really helpful I've had a few of you
that have let me know hey we we took
that extra minute to do it it didn't
take us very long it will not take you
very long but it really goes a long way
and I really appreciate it when you guys
do that today we're going to be talking
about three values or three ways to
evaluate a home value three value of a
home and there's a lot more to this
conversation that we're going to cover
I'm going to kind of introduce this
concept and we might build it out on a
future episode but there's a lot of
ways that you can value a home or you
can value a property and oftentimes I'll
get the question from people what should
I offer on this property what do you
think is is a good offer for this
property and that's a really difficult
question in this market at least that
question is a lot easier when a home has
been on the market for a while because
when it's been on the market for a while
you that is a a really relevant piece of
data the amount of time it's been on the
market as well as what has happened
has it come down on the price what is
going on with that house why has it been
on the market for a while you can
take that
information and then kind of back
yourself into what a good offer would be
for a variety of
reasons again I'm not going to get into
all of that because that's not really
the way the market is right now for in
the for the most part I should say
the market right now is just insane we
get people that they list their house
right away multiple offers that just
happening all the time we get investment
properties get listed above what
investment properties have ever sold for
and someone comes in as as a cash buyer
and purchases them up it's just a
crazy
market and so you don't get as much of
an opportunity right now to look at a
home okay here's a home that's been on
the market for a while let's figure
out based on all of the data that we
have why a why this home hasn't sold yet
and then based on that what is a fair
price and a good price and a reasonable
price so we could get this under
contract for that's very that's a lot
more difficult to do when a home first
comes on the market because it's a
sellers Market it's an expanding Market
it's a it's a market where if you
don't jump on a home right away and and
and act aggressively in terms of your
offer oftentimes you'll end up losing
out on it and so when people ask me what
should I offer on a property that's a
property that has just come on the
market there are really three things
that we have to look at and the first
one I've used the word market a lot and
I'm I'm going to have to keep using that
let's let's define market for a second
Market at the end of the day is just
people it's people that want to buy
something and so when we talk about a
free market obviously and from an
economic standpoint I'm I'm no economics
Guru but I know enough to be dangerous
free market is just people that are
allowed to to buy and sell without a
whole lot of restrictions and so when we
talk about the market in real estate
we're talking about people that are out
there looking to buy and they are
ultimately the ones that set the value
the the primary value of a house and
markets are defined or or markets are
restricted in two ways by and we've
talked about this before in in
previous episodes but it all ultimately
comes down to supply and demand right we
all know this so Supply is in a real
estate World Supply is the number of
homes for sale demand is the number of
buyers looking for those homes and it's
really simple as Supply goes down and or
demand goes up then the price of homes
go up why because there are more people
buying than there are people selling and
that raises the price of the homes when
it's flip-flopped such as during a
recession usually the price of homes go
down so if there are more homes for sale
than there are buyers for those homes
then those homes start to lose value at
that
point and and so that is
ultimately the basics and and
probably for most of you that are
listening to this you already know that
but but just to make sure that I don't
skip over anyone that that isn't really
thinking in these terms that is
essentially what we're talking about
when we talk about the real estate
market we're thinking from the
standpoint of the buyers out there the
sellers out there how much supply and
demand is relative to each other well we
know I've talked about this ad
nausein previous episodes we are at a
level right now where demand is much
greater than Supply and so that's what
is driving this as a crazy sellers
market and what's causing prices to
really go up just higher than we've
ever seen in the greater Greenville
area so to bring this all back when
someone asks what should I offer what is
the home worth the first thing you have
to consider is the market value now this
is is easily the most difficult thing to
determine but it it's arguably the most
important thing to determine one way
that you well let me just say this the
reason why it's hard to determine is
because when a home hits the market
it it can be difficult to know right
away is this is the market going to
respond well towards this home are
they going to love this home is it
going to have multiple offers is it
going to sit for a while it's hard to
know right away what's going to happen
there are a few telltale signs a few
ways to kind of figure it out one
obviously is just realtor to realtor
we'll communicate sometimes a little bit
off the Record and you know sometimes
I'll ask you know what kind of activity
are you getting on this property and
often times I can get a pretty
transparent response from another
Realtor about that they'll be like you
know yeah we're we've got five five
people coming through in the next couple
hours we've already got a couple offers
etc etc if they're not getting a
whole lot of activity then usually they
won't tell me that usually I can just
tell by their tone of voice and other
things that okay they're not getting
that much activity so that's one way
that we can determine what the market
thinks about a new listing another
way is just to see how many showings are
are showing up up and there's a few ways
to see that a lot of us Realtors we
use software called showing
time and that can be set up so that
actually people can kind of look ahead
and see how many showings are coming up
I always Scout that out if I can to see
what what showings are are forthcoming
on a home but Common Sense wise if a
home is priced aggressively or if it's
just a home that just really
shines compared to the other
competition in that area or if it's a
home that just really has some unique
factors that are really
desirable for for the area that it's
in you know maybe it is just perfectly
well-maintained perfectly updated in a
great location in a neighborhood that
sells really quickly and maybe it is
priced higher than any other homes in
that neighborhood but because it is so
much better than any of the other homes
in the neighborhood we know okay this is
likely going to sell very quickly for
very close to what it's listed for if
it's a home that is really underpriced
and this one is is pretty easy to
determine if it's a home that's
underpriced I mean we had this past week
a home in Greer South
Carolina it was like a a three-bedroom
two B home on like a 1acre lot in a
decent area of Greer and it it came on
the market for like 170 something like
that and I had someone reach out to me
about and I was like well you know just
so you know there's going to be 30 to 40
offers on this home and guess what there
were 30 to 40 offers on that home and
there were some quirks about it we went
out we still looked at it it wasn't a
perfect home there were plenty of quirks
but you get a three-bedroom two-b home
in Greer I don't care unless it's
falling apart if it's below $200,000
you're going to get a ton of offers on
the home that is just the way it is so
you have to first when you're when
you're looking at a home consider the
market value and there is a lot of Art
and not as much science when it comes to
the market value but that is a big part
of it you're looking at the activity
you're looking at the likelihood that it
will sell quickly you're looking at does
this property Stand Out compared to the
other properties at that price point
these are the things that you're looking
at to try to determine the market value
and that helps you to decide okay should
I put an offer that is basically what
they're asking should I go above what
they're asking which unfortunately is
the case a lot right now should I
make an offer below what they're
asking which typically isn't a great
idea when a home first comes on the
market but that may be the the best
thing that that you can do and that
might be the appropriate thing to do for
a home that has just come on the market
it just depends market value is one of
the ways that you determine that the
second home value assessment to make is
the appraisal value okay now this one is
easier to figure out and you're you
might be wondering how is market value
different than appraisal value well if
listen to my podcast couple months
ago I went on a bit of a rant about how
appraisers don't really Factor the
market in when they are appraising a
house their appraisal is a very Niche
thing an appraisal is not assessing
supply and demand so the the market
value is taking supply and demand almost
exclusively into account right when
you're looking for a home
you're not looking at the homes that
have sold the past 12 months you're
looking at the homes that are available
right now and if a home stands out
that's available right now versus the
other ones that is going to be the home
that has the most value to you but an
appraiser doesn't look at the homes that
are for sale they don't even I mean I'm
sure that they look at them but they
don't really care about the homes that
are for sale they're only looking at the
homes that have sold recently and in
that same
area and so the appraisal
value can help you to well it helps you
in a few different ways one is it if you
know roughly what the appraisal value is
that can help you to make sure that
you don't O A over spend you know that
can kind of tailor your opinion about
what the home is worth because at the
end of the day the appraisal value might
not tell you what the market value is
but it will tell you what you can get
financing on so for instance let's say
you get a home under contract for
$300,000 and the appraisal comes in at
$280 well you're going to have to bring
an extra
$20,000 down in addition to whatever
down payment your lender is requiring of
you so let's say that you
are trying to bring 5% down right so 5%
on a $300,000 house is
$115,000 I'm not good at by the way I'm
very good at math but when I am trying
to do math while I'm doing this podcast
like there's like a gazillion different
things going through my mind as I am
you know recording a podcast suddenly my
math brain goes out the window maybe
it's because I I'm I'm trying to channel
my artsy brain as I'm doing this I don't
know I'm not sure how that works but
$115,000 would be a 5% down payment on a
$300,000 house well let's say that it
appraises for $
280,000 well the lender is only going to
give you
95% because you're bringing 5% down
they're only going to give you 95% of
whatever the appraised value is so if
the appraised value is
280,000 and you're under contract for
300,000 now you have to bring 5% down on
280,000 which is now instead of 15,000
it's 14,000 but you also have to bring
the
$20,000 to make up the difference
between the 300 and the 280 so now your
down payment just went from
$115,000 to
$334,000 well that is a big deal right
and there is a possibility that you
could negotiate the price down with
the seller I've had success with this in
the past but in a seller's market a
lot of sellers don't want to do that
and particularly if they got multiple
offers I I had a situation happen
recently where I had multiple full price
offers on a home and I let the appraiser
know that and the appraiser just flat
out said I don't care again the
appraiser does not care about things
that pertain to the market right now
they are only looking at what the market
has been in the past and that is what
they are basing everything on and so
it's helpful for you to know that you're
not getting under contract with a home
that's likely to have appraisal issues
those appraisal issues could possibly
help you if you're able to get the
seller to come down your price but
but if you have to bring several
thousand doll more to the closing
table that could really be a big deal
and it it could end up in a stressful
negotiation in the middle of the
contract and so it's something that's
good to know and and I usually try to
look at that okay what is how does this
home compare to other homes in the area
that have sold because I don't want my
clients to overpay on a home let's say
that the appraiser does say you know
what yeah I'm I'm fine with with
appraising this home at Value it's it's
on the the high end for this
neighborhood but you know it's an
appraiser that understands that the
market is expanding and so he we have
this happen a lot he just puts the value
of the home at the contract value
well if that happens I want to make sure
that my clients aren't overspending at
the end of the day I want them to be
getting the home for at least what it's
worth and again the appraiser is not so
much worried about that he's trying to
protect the
lender and so the long story short is
it's helpful to know
approximately what the market has been
in the past to look at
the comps as we love to say in the real
estate world look at the comps we
love to look at the comps look at what
values have been in the past and then
that helps you to determine okay I don't
want to overpay for the home typically
so let's look at the at the comps
from the past and let's come up with
generally what an appraisal value would
be for this home and what an approximate
price range would be from an
appraisal standpoint that's another way
that you value the home and again it's
very different from the market value
market value you're looking at what's on
the market now appraisal value you're
looking at what was on the market and
what's sold in the past and of course I
look at as well as I'm doing this type
of research homes that didn't sell
that's not something that an appraiser
would look at would look at but that's
helpful for my clients because it's like
okay let's let's see what homes didn't
sell in this neighborhood cuz let's say
it's a transition
neighborhood and certain streets are
in you know much better condition
than others from the standpoint of the
homes that are that are on the
street that can really make a
difference you might be purchasing a
home on a street that has had four homes
that went for sale that didn't sell well
that's a a really important factor at
the end of the day an appraiser is not
going to factor that in but that does
give you an idea of what the home could
be worth in the future based on what's
happened in the past so those are two
ways to value a home to evaluate a home
but the last one might be the most
important out of all of them and this is
what I tell particularly my clients that
are owner
occupants but it's also subliminally
in the background with my investor
clients as well is the value to you what
is the home's value to you and in sell's
Market you almost just have to throw the
list price out the window the list price
right now is so arbitrary it's it's
almost worthless if the list price is
high in your opinion it might not be
high there might be multiple offers on
on that property that has what appears
to be a high list
price and if the list price is low as is
as was the case with that Greer property
I mentioned before if it's a a low list
price well you definitely need to just
throw it out cuz it might sell for 20 30
$40,000 more than what it's listed for
it might sell for 25% more than what
it's listed for that is the way the
market is right now and so you need to
think about it from the standpoint of
what is the value to you what is this
home worth to you and that is the most
important question now for investors
they have a lot of different rules that
they operate off of and again we'll
probably get into that in a different
episode but you might have a rule in
terms of well I won't exceed this
percentage for a flip of different you
know the after repair value and then the
repairs and all of that that could be a
rule or you might have the 1% rental
rule again I'm not getting into all of
that right now but that is from an
investor
standpoint they're considering what the
value is to them and a lot of that
factors in more how much a property can
cash flow or how much it will be worth
after it's repaired all of these
different things but just to the
ordinary average person just buying a
home or selling a home that they live
in it's got to be considered from the
buyer's point of view what the value is
to them and is the home worth to you
what it's listed for well then you
probably need to offer what it's listed
for if it's worth more than what it's
listed for and it's not listed in a way
that appears to be dramatically
overpriced then you probably just need
to offer as high as you feel comfortable
with knowing that you know if the
appraisal comes in low then you that
offers you a little bit of protection at
the very least you could back out of the
contract if all else fails if the
home is not worth to you if you're
interested in it but it's not worth to
you what it's listed for then great what
is it worth to you is it worth 250,000
is it worth this or is it worth that
there's a lot of different things to
consider with this and but at the end of
the
day when I'm talking to my clients and
they ask me that what is this home worth
what should I offer my question for them
is what is it worth to you because
that's more important than all of these
other things because at the end of the
day the market is going to determine
what it sells for but you are a part of
that market if you're a
buyer and you as part of that market you
have to set the price for yourself in
your own head and you have to be
considering a lot of different things so
if you've been looking for a home for
like six months and you've seen like
nothing that fits the criteria of what
you're looking for and finally one comes
on the market you probably need to be
aggressive if you finally after 6 months
have found that one house that's like
okay this fits my very specific
criteria don't be afraid to be
aggressive in that situation you know
you're living in that market every day
you know that that's a unique home and
that needs to be reflected in how you
present an offer
if it's a home that's like you know what
I've seen a gazillion of these but it's
like I kind of like this one but I'm
okay with losing out on it then that
needs to be reflected in your offer as
well maybe at that point you give you
know if it's a home that just came on
the market statistically we know that
those homes tend to get 98 to
99% of what they're listed for in
terms of of the final contract price the
final sales price
so you don't want to necessarily give a
lowball offer right away that's probably
just going to be laughed at but you
might come in with something close to a
full price offer maybe a full price
offer and ask them to pay for some of
your closing costs ask the seller to pay
for some of your closing costs knowing
that hey they might get some other
offers that are better than this and
that's okay I'm willing to lose that on
it that is the value to you and that is
the most important thing to consider if
you're an investor the value to you
really could change for instance if
you're trying to balance out your
portfolio maybe you've got a ton of
Class C rentals and you're like you know
what I need to balance this out with
some class B some class A whatever the
case may be
and all of us know here in Greenville
there's not a whole lot of options when
it comes to those one of them hits the
market and yeah might be on on the
pricey side maybe the cap rate again
I'm using some investor terminology so
just kind of tune me out if you're not
an investor but maybe the cap rate's not
great but it gives you that opportunity
to balance out your
portfolio that property might be worth
more to you than it is to someone else
you need to consider that if you're
trying to make a 1031 exchange you've
already sold a property and and you're
trying to identify that property to buy
to complete the 1031 and now you're in
this situation where you're kind of up
against the clock because there are
timelines you can't just drag out a
1031 for ever a property might come on
the market that wouldn't have been very
valuable to you a year ago but now
that you're trying to complete this 1031
exchange to make sure that you can defer
your capital gains tax now you find
that this property has more value to you
right here in this moment and so I could
go on and on with a ton of other
examples like that but at the end of the
day you have to consider all of these
things what is is my situation how am I
desperate to purchase am I desperate
to move am I looking for a really unique
property
what are all the different factors
what's the market like right now these
are all the things that you consider
when you're determining the value that a
home has to you and this is something
that I talk through with my clients and
I and I try to help again I don't want
to
this is a very difficult market for
realtors when we're representing buyers
because we don't want I never want any
of my buyers to overspend I always want
them to get the best deal possible and I
had multiple clients in 2020 that they
ended up getting homes for below their
appraised value which is amazing that
does not happen very often in a seller's
market but at the same time it's a it's
a delicate balance because so many homes
are selling for more than what they're
listed for so many homes are selling in
multiple offer situations
and I don't want my clients to miss out
on a home that they really really love
and it puts me in a weird spot because
honestly I I see a lot of these homes
coming on the market that are like
that's probably going to sell really
quickly you probably will need to to put
more than a full price offer on it
but that kind of feels like a copout you
know me as a realtor I'm supposed to be
finding all these great deals but right
now those don't exist they're are not a
lot of great deals that are out there
I do have a lot of contacts with people
selling homes that are off Market
sometimes there are some good deals that
way and I've been I've had several
closings the past 12 months with clients
on off-market types of properties but
you have to be in it for the long game
to to find something like that and
so you need to if you're actively a
buyer you need to be thinking through
what is my situation
as a buyer what are all the factors that
go into determining what I'm looking to
buy how difficult will it be for me to
find what I'm looking to buy and then
that will help you to
determine when a home comes on the
market that fits your criteria how
valuable it is to you and you still want
to look at these other things you still
want to consider the market value think
about the supply and demand that's going
on you still want to look at the
appraised value or or get an idea of
what the appraisal value might be on the
home by looking at past sales in that
area but at the end of the day the most
important thing is how valuable it is to
you if you want to talk about that
anymore reach out to me contact
information is in the show notes again
leave the show a rating or a review if
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anything from me happy to help you guys
with anything but until next time I hope
you guys stay safe and if you're looking
for a home or for a property that has
the perfect value for you that fits your
criteria value I'm your guy reach out to
me let me know and I'd be glad to help
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