I recently had a discussion with a seller who was upset since the real estate agent doing the comparative market analysis (CMA) on his house told him he probably couldn't sell it for the amount of debt he had against it (both a first and a hefty second mortgage.)

His question to me was, "Do you think I could find someone who could give me a higher bid? After all, don't market analyses vary?"

Somehow he missed the point.

If sellers consistently listed their homes at unrealistically high prices, no buyers would buy, no sellers would move, and the entire economics of the real estate market would be in an uproar.

As the real estate agent explained to him, it's not a matter of obtaining a "higher estimate". A seller needs to be totally objective about what he owes compared to what the property is likely to sell for. Very few ready, willing, able and realistic buyers are going to over-pay for a property, especially if a market analysis cannot back up the value. (Yes, there's always the "I want this home and I'm going to overpay to obtain it" buyer -- but the operative word in the previous sentence is "realistic.") This is particularly true if they're represented by a buyer's agent who prepares their own CMA on that property for them to show them what a solid market price would be.

When a real estate agent does a market analysis, the "sold" properties he/she selects to compare the subject property to should be similar in style, design, square footage, and amenities. They should also be located in similar neighborhoods. If a seller doesn't agree with the comps the agent used, he/she can ask for an explanation why they were chosen.

In addition, if the seller knows of any other sales in the neighborhood, he should bring them to the agent's attention. More recent sales often reflect a change in value (either higher or lower) not seen in older comps. And since there's often a lag time in recording sales on the public record and/or reporting sales to MLS (not to mention for-sale-by-owner sales that occur) these can prove an additional source of information.

While preparing a CMA can be somewhat subjective depending on the agent interpreting the data, I pointed out to the seller how the real estate agent was actually doing him a service by his even-handedness in determining a market value. Unless the seller was willing and able to bring a check to closing to cover the two mortgage balances he owed, the agent was protecting him from getting into a legal position when he couldn't close a sale with a potential buyer.

He finally agreed that he knew the agent was being honest with him, that the honesty was in his best interest, and that he would just wait until the house appreciated enough and/or he paid down the mortgages a bit more.

And as we parted, I heard him mumbling something about how the lender who made him that 125% loan-to-value second mortgage would maybe take less to bail him out.

Sounds like some people never learn.

Published: May 19, 2000

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Julie Garton-Good, DREI “The Frugal HomeOwner™” As a syndicated newspaper columnist, author and international speaker, Julie Garton-Good DREI, C-CREC™, is called “America’s Home Affordability Expert”, addressing more than 25,000 persons annually on topics of real estate industry trends and home affordability. She is the author of five real estate books and is the sole two-time recipient of the international "Real Estate Educator of the Year" award from the Real Estate Educators Association. In 1997, The National Association of Realtors® nominated Julie as one of the fifty most influential people in the real estate industry. She shared the list with only three other women.