By Ross Wilson

“Motivation is the art of getting people to do what you want them to do because they want to do it.” – Dwight D. Eisenhower

I realize that nowadays the strategy that oft wins the listing is how much actual service a salesperson offers for how small a fee. Sometimes it’s about how many advertising dollars are promised, which really means nothing, other than the agent has deep pockets and/or a big ego. As I’ve always said, ads don’t sell real property – skilled people do. Well, technically, homeowners sell property and agents hope to create opportunities to sell, but that’s a topic for another day.



In this series of articles, which are abridged excerpts from my book, The Happy Agent, I address the philosophy, skills and ethical techniques that I practised throughout my highly successful 44-year realty career.

Agents are usually happy, if not thrilled, for the chance to present to a prospective seller and gratefully do so free of charge. They hope to convince them to list – realistically – and hope the property sells and hopefully closes successfully, after which they hope to finally receive a sizable fee for their efforts and hope that their brokerage doesn’t claim all those dollars for account arrears. That’s a lot of hoping. As expert entrepreneurs, they operate on the premise that the potential reward is worth the risk. I suggest, though, that you not rely so heavily on hope.

Before accepting an invitation to consult with a homeowner, it’s smart to discern why they want an evaluation. They may be serious about selling; if this be true, go for it. They could, however, just be curious about their home’s market value and have no immediate plans to list. They may need a Comparable Market Analysis (CMA) or Letter of Opinion of Value for a credit application, matrimonial conflict or court case.

Don’t be shy – ask if they’re seeking opinions from other agents. Sometimes they choose to list with the agent who promises the highest price or the lowest fee. So that you can be properly prepared, it’s only fair they disclose their intentions. Or perhaps you might refuse to play their game; it’s always your choice. In any case, you should make an informed business decision whether to proceed to spend your precious time.

If they’re forthright and disclose they have no plans to sell anytime soon, before you commit to the task, you could request a flat fee for service, to be deducted from any commission if the property is listed and sold with you, say, within six months. If they agree, to prevent possible future conflict, it would be prudent to confirm in writing. You may not mind working for free, but don’t allow them to take unfair advantage of you. You could still do the work and hope they remember your generosity, but don’t count on it. Memories can be short, especially for those infected with Money Madness.

What’s a property worth? It’s a common question not easily or always accurately answered because it demands the conversion of subjective opinion into objective fact. Unless you possess psychic foresight, it’s impossible to foresee. The inherent nature of an open market, hence market value, is dependent on the law of supply and demand. This most basic law roughly states that an increase in supply can deflate market values, whereas an increase in demand can inflate them, and the opposite holds true. Supply and demand boil down to subjectivity. Nevertheless, even though a CMA is far from definitive, it’s one of the foundational pillars on which our industry was built and can undoubtedly provide clues to establishing a rough estimate of value.

Offering a verbal opinion without research is just an unsubstantiated guess. It might ultimately prove accurate, but why amateurishly gamble with a homeowner’s foremost asset? If a prospect insists on your best informal estimate, at least preface it with a disclaimer that it’s just that – an educated guess. Since you may be unaware of a recent sale that could significantly affect their property’s value, favourably or otherwise, it shouldn’t be relied upon for a major decision. Also, without thorough research, why would they necessarily believe you? A meticulous investment of resources is the path to credibility and trust.

What you create for a prospective new and sometimes existing seller (or buyer) is not unlike a report prepared by a certified appraiser. However, there are a couple of significant differences. A residential appraiser is paid a flat fee to produce – with or without a personal property inspection – a written standard form report containing a precise considered opinion of value based on historical data. For lenders and lawyers, whose needs normally demand specific and easily substantiated calculated amounts, form appraisals are considered standard procedure. But unlike appraised value, market value is more abstract, more subjective. The same basic methodology is involved, but the evaluation process goes to what I feel is, at least for agents and most consumers, a more practical level.

Since you’re actively working the market, your instincts may be more honed than those of someone mining data from behind a desk. You’re familiar with competing or sold listings because you actually viewed them. The ultimate sale price of your prospective seller’s home may differ substantially from an appraised value (or even your original estimate) since a formal appraisal doesn’t involve exposing the property to a competitive marketplace where virtually anything can happen. Just as stock market bidders can frantically push a share price beyond its arithmetically calculated book value, fervent realty buyers can drive prices into nose-bleed territory.

In the next column I continue this topic by addressing more specifics about market evaluations and the helpful conclusions that can be drawn from a thorough CMA. The listing details used in its preparation are not just a bunch of numbers to average together.

6 COMMENTS

  1. Another spot on article, Ross. Your comments re “appraised value” per a certified appraiser’s opinion of value raise some interesting conundrums.

    Speaking as a former Realtor and a former Appraiser, i would like to add a couple of points to your piece.

    Most people don’t realize that an appraisal is only good for the day the appraisal document is signed off on by the appraiser. All bets are off going forward. Most appraisals contain a declaration that the market is seen to be increasing or decreasing in price. Note the difference between “price” and “value”.

    “Price” is what was, what properties have actually sold for.

    “Value” is what someone—in this case, an Appraiser—declares a property to be worth per his/her ‘opinion’ at the time of signing the appraisal document.

    Thus, no one can truly know what the value of a certain property is to the market at large. Only an interested and motivated buyer can determine for himself/herself what value a subject property holds in his/her estimation at the precise time of offering. This us where emotion enters the picture, as you well know.

    Emotion clouds one’s judgement. Emotion causes one to overlook clear-headed thinking. Thus, when an emotional transaction occurs, that often-elevated sale price enters the world of appraisers’ choices of comparables. I think we both know that emotion drives the majority of residential sales, both new and used stock. So then, what are we to think of certified appraisals vs Realtors’ CMA’s?

    Appraisers are not buyers. Supposedly, they are unemotional arbiters of past sale prices being applied to future sale prices. But appraiser ‘are’ emotional beings. They have likes and dislikes. Their personal opinions about this and that concerning their contracts often ‘do’ influence their opinions of value.

    The only close-to-accurate appraisal occurs when the appraiser inspects/measures the subject property, and then chooses multiple recent sales of similar properties in the immediate area of the subject. Similar properties currently for sale in the area are also considered. Then accepted amounts of dollars are added/deducted to and from the subject respectively regarding differences in the comparables and the subject to finally arrive at an opinion of value. This number may have nothing to do with what the subject will actually sell for, depending upon market conditions and length of time on the market. In other words, it’s all a crap shoot.

    Appraisals most often exist in order to establish a bench mark for lenders to feel OK about when it comes to offering a mortgage…period. It’s an ass-covering device for the benefit of the official OK’ing the loan. End of story.

    A really competent Realtor—a rarity when one considers how many newbies/failures-in-waiting occupy the business on any given day—will be able to provide a realistic estimate of what price a seller can expect to receive for his/her property within a certain time frame on the market. The real skill involves being able to sell that price to the seller, list the property, and follow through on the promise, because that is what it is, a promise to perform. There aren’t many really competent Realtors out there, but you certainly were one of them.

    CREA et al: Include Ross’s book within the Realtor education programs. Learning the ropes is best achieved by pre-qualified newbies at the direction of former long-time pros who can relate to the newbie wannabes, and not by institutionally delivered do’s and don’t’s by uninspiring teacher-types. The reading of Ross’s book should be part of a pre-qualifying process, with exam questions being asked of the potential students based on successful comprehension of the content of the book. The passing grade should be 90%. Only then should a candidate be created.

    • Hmmm….

      Have you ever witnessed an Appraised Value (CUSPAP) change over one single month, when none of the surrounding 1000 homes closest to it sold in that month?

      I have had a few hundred clients told NO by their bank over the last 20 years. “Your house is not worth more today than it was last month”.

      No lawyer would accept a changed home value in a divorce court one month apart and no judge in history in Canada has agreed any home’s value has in fact changed.

      What really needs to be taught means the $30,000 in commission for 24 hrs work defies logic.

      • Thanks, Nelson, for your comments. Once of the concepts included in The Happy Agent is that of varying commission/fee plans to suit various realty scenarios. I respectfully suggest that you might wish to explore them further by reading The Happy Agent. Thanks again.

    • As always – insightful and well said. Thanks for your kindness for once again promoting The Happy Agent. Nothing would please me more than to share my business and life philosophies with my former peers. Thanks again, Brian.

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