MJ Talks Strategy With Pricing

Wallace Smith:
So MJ, as far as listing, and there’s a lot of strategy involved with the listings that’s really going to affect the pricing. We’ve seen properties recently. I know you and I are talking shop, we saw one that was priced so far below the market. And that was unusual. But that almost just seems like generating too much noise and too much work. Because they ended up probably having three times as many people walk through the place than they needed to. So that’s a big part of it. What are the other things? You talked about pricing, you talked about appraisal gap. Chat about that a little bit in today’s market.

MJ:
Well, in today’s market, sometimes they do price them just a little bit lower to generate more activity. And this particular one, he said he did the comparables and that’s what it came out to be. But I did the comparables. I would’ve listed a little higher. But right now the strategy is to list it right where you’re going to get activity. And if you list it too low, then you might get too much activity. Too high, and nobody comes. And so you list it about where the market, maybe push it a little bit. But then buyers come in and buyers right now are coming in and they’re offering more. And then they put an appraisal cap in there. And some even put an escalation clause or an acceleration clause to say they’ll go up to this price if there’s another offer. And then they do limited inspection.

Wallace Smith:
So you end up with competing accelerator clauses ever?

MJ:
Yes. And some agents will say no escalation or no acceleration clauses. Come in strong. Now if we get multiple offers, then I’ll go back to the top couple of offers and say, “Bring us your highest and best. No escalation. Because we want to know what are you willing to pay?” Also, the strategy is, an appraiser might say, “Well, we agree with the original price and not the escalated price.” So we want to have a contract that has a solid, this is what we’re paying. And not a counter saying, “Oh, we want you to pay this much more.” And then the appraiser is a little confused.

Wallace Smith:
So then having that offer that would include gap coverage basically. Hey, if we offer more than it appraises for, we’ll make it good.

MJ:
Right. But it’s tough for those first time home buyers or for the move up in that half million. Because if they want to put 20% down, that’s a hundred thousand. If the appraisal comes in and they go, let’s pay 510, well, they can pay a little bit more. The mortgage can be a 10,000 more and not affect them that much per month. But if the appraisal comes in at 500 and they’re paying 510, they have to come up with that 10,000. It’s not just like, it changes it to 102,000 they’re putting down instead of a hundred.