THE BLOG

17
Oct

When To Get An Appraisal

An appraisal is a licensed professional’s unbiased opinion of a home’s value at a specific time. This estimation of value primarily serves to protect the interests of buyers and lenders. Buyers don’t want to pay more than a home is worth. And lenders want to ensure that the collateral, which is the home, justifies the loan. However, there are also advantages for sellers to get an appraisal.

When is an Appraisal a Good Idea for Sellers?

Internet websites such as Zillow and Realtor.com provide home buyers access to an abundance of real estate data. While this is convenient for buyers, the data is often inaccurate. Moreover, this problem is widespread when it comes to the website’s estimated value of Las Vegas luxury homes. These websites don’t account for the value of custom finishes, views, lot position, etc. What’s worse is they often don’t assign the proper value to guard gated communities.

Custom homes with views and high-end amenities have a thinner sales market, especially at higher price points. If your property is unique, buyers’ agents may not be able to support your sales price by comparable sales. Having the opinion of an impartial third-party appraiser can eliminate confusion and help justify your asking price.

Using the Appraisal to Your Advantage

Over half of the luxury home buyers in Las Vegas use a mortgage for their purchase. When a buyer applies for a loan, their lender has its own appraisal done. The bank will only loan a portion, typically 80%, of the appraised value. Here’s a good example:

A buyer contracts to buy a home for $1,000,000 and the bank requires a 20% down payment. So that’s an 80% loan-to-value (LTV). In this case, if the home appraises for $1,000,000, the bank will lend $800,000. The buyer then has a down payment of $200,000. However, if the home appraises for $900,000, the bank will still only loan 80% or $720,000.

It’s a red flag for the buyer if the appraisal comes in below the sales price. In this example, the buyer would have to come up with an extra $80,000. Buyers don’t like unwelcome surprises. More to the point, no one wants to overpay for their home. Therefore, when the appraisal falls short, the buyer often calls off the sale. So getting an appraisal to justify the sales price for your luxury home can be to your advantage.

Actual Las Vegas Luxury Home Transaction Success

In an actual transaction, one of our listings had a higher sales price than the recent sales in the neighborhood. But the home, in this case, had complete interior renovations. The inside of the home was as up-to-date with custom finishes as any buyer could want. We had a lot of interested buyers, but they had a hard time justifying the price. The buyers only became comfortable paying the sellers price after they saw the appraisal we advised the seller to get. Again, having an appraisal was a huge benefit to our seller.

We also recently had an all-cash deal where our listing went into contract at $1,350,000. The buyer’s appraisal came in at $1,300,000. However, upon review, we found there was no accounting for certain items. This property had nearly $400,000 in upgrades! So our seller paid for a second appraisal, which came in at $1,370,000. With that appraisal in hand, the buyer felt comfortable paying $1,350,000 and the sale closed.

Is a Luxury Home Appraisal Right for You?

An appraisal is not a one-size-fits-all solution. Not every Las Vegas luxury home should get an appraisal. We work closely with our clients to employ the best sales and pricing strategy. If you’re selling a unique Las Vegas luxury property, you should at least consider an appraisal. This is true regardless of how far along you are in the selling process.

We have a long history of successful high-end residential sales. We also make sure the sale closes at the highest possible price. Please call us at 702-605-7480 with any questions including whether an appraisal is right for you. You can also email me at rob@robjensen.com. I reply to every email personally. Hope to hear from you soon! – Rob Jensen

17
Oct

How Fast Should My Home Sell?

One of the most common questions that luxury home sellers ask is “How fast should my home sell?” 

Beyond the price and condition of your home, how fast your home will sell depends on market conditions—specifically absorption rate and days on market. Understanding these indicators will give you an idea of how much activity to expect once your home goes on the market. There’s also a distinction between “now” buyers and “new” buyers to keep in mind. Knowing which type of buyer to focus can help your home sell quicker.

Absorption Rate: Predicting How Fast Your Home Might Sell 

Absorption rate is a common tool used to get a feeling for how competitive the market is, specifically for a home like yours. As lovely as your home may be, to a buyer your home is one of many choices. There’s always a supply of similar homes available. Of course, these homes are not necessarily the same as yours, but they might have a similar square footage, location, price point, golf course frontage, views, amenities, etc. 

In essence, absorption rate is a rough measurement of supply and demand. When you calculate absorption rate, the result is a length of time (in months) that it will take to sell current inventory.  A buyer’s market has eight months of inventory or more, while a seller’s market has four months of inventory or less. Anything in between is considered a balanced market, which doesn’t favor either party. See the examples below (done with easy math) to understand how absorption rate is calculated. 

Example 1:

If there have been ten sales in the last ten months, that’s one sale per month. So, if you’re seeing about one sale per month and there are currently ten homes for sale, that’s an absorption rate of ten, meaning there’s about a ten-month supply of homes on the market. In this scenario, the market is a little bit softer, so selling your home is going to be more competitive. This is a buyer’s market. 

Example 2:

If there are about two homes selling per month and ten available, you now have a five-month supply of homes on the market—a big difference. In this scenario, the market is definitely much stronger, but it’s still not a seller’s market. Here, the market is considered balanced or neutral.

Example 3: 

If there are three homes selling per month and ten available, you now have just over a three-month supply of homes—a seller’s market!

Clearly, absorption rate is worth looking at to help you understand how competitive you might need to be. The key here is to calculate absorption rate based on comparable homes sold over a recent timeline in your specific location. At the Rob Jensen Company, we report absorption rates in the Las Vegas area every month in our newsletter. To make sure we’re offering the most relevant and helpful data to our clients, we break the absorption rates down by different price points within the local guard gated market.

How Fast Should My Home Sell

Days on Market

Another statistic to consider is how many days competing homes have been on the market. Look at the comparable homes that sold in your area, then find out how quickly they sold. More importantly, look at how quickly they sold once they were priced correctly.

Sometimes homes sell for top dollar shortly after they are listed. Other times there’s a price reduction involved before you get a sale. You might have noticed a home sitting on the market for a year or more. When you look at the price history for homes like these, you’ll often find that the home sold quickly after a price reduction or two.

For Example…

The home mentioned in the chart below featured a desirable modern design with loads of upgrades and high-end finishes. All things considered, it was in top condition. We marketed the property extensively using targeted video and print campaigns. In the first few months, we had 12,970 video views (3,644 on YouTube, 6,320 on Facebook, and 3,006 on Instagram). Using our monthly newsletter, we shared the listing (complete with high-quality photos and professional copywriting) with 11,558 locals living in guard gated communities. We also sent it to 3,917 targeted subscribers on our email list.

Once the clicks and calls started rolling in, we showed the home to six interested buyers—but no one made an offer. Why is that? In real estate, if the marketing is done right, the home is in great condition, and you’re still not getting offers—then it’s time to take a closer look at the price. After this home sat on the market for almost three months (83 days), we sat down with the sellers and decided to lower the price. Once the home was priced correctly, it went under contract in just 25 days!

How fast should my home sell?

When you figure out the right strategy and your home hits the market, you should have activity in the first one to three weeks, regardless of what price bracket the home falls into. If you’re not garnering buyer’s interest during this peak traffic period, it might be time to reconsider your strategy.

Two Types of Buyers That Look At Homes

“Now” Buyers

A “now” buyer is someone that has been looking for a home for a while—the last couple months to the last year. They’re usually more educated in terms of the market. They understand pricing, and they may have even missed out on the perfect home, either because they were outbid on a property or they didn’t get their offer in fast enough. “Now” buyers are further along in the buying cycle, have more motivation, and are generally ready to pull the trigger. 

For properties with features or amenities that warrant top-tier pricing, sales price records are made in the days or weeks following launch. When your home hits the market, you’re tapping into a pool of “now” buyers. How big that pool is depends a lot on your price point. The higher the price point, the thinner the market. Whether you have 100 or 1,000 potential buyers, when you go live on the Multiple Listing Service and the home hits the market, making the most of that grand opening is critical. You generally don’t see homes sitting on the market for three or four months and then selling for full price.

“New” Buyers

On the other hand, there are “new” buyers. These buyers are newer to the market and are generally two to ten months out from being ready to buy. At this stage, they’re still deciding what part of town they want to live in. This is especially true if they’re moving from out of town. Though it will happen eventually, waiting for “new” buyers to get educated and mature into “now” buyers is a mistake. Regardless of your financial ability to hold onto your house, sitting on the market doesn’t help unless the market is appreciating. If none of the “now” buyers are biting in the first few months (in general; remember to look at days on market and the absorption rate specific to your property), this could be a sign of a bigger issue. It could be marketing, it could be condition, or it could be price.

How Fast Will Your Home Sell?

When it’s time to sell, understanding market conditions will help you make the correct decisions before launching. Take the above concepts into account when establishing your selling strategy, and you’ll be one step ahead of the competition. Ultimately the timeline for your home sale comes down to your game plan and your goals. At the Rob Jensen Company, we make sure to do the market research for each specific property ahead of time. That way, we can bring this information to the table when it’s time to discuss selling your home and meeting your price and timing goals. If you have any questions, we’d be happy to help. Contact us today!