Who is Right?
By Jim Palmer Jr.

In a typical property sale the sparring match between the listing broker and buyer broker usually begins in the early stages of price negotiation before an offer is ever presented.  The mentality of the typical buyer broker is to attempt to discredit the listing price or criticize the property in some way.  Listing brokers counter those jabs by justifying their listing price and extolling desirable amenities.  This adversarial sparring can get heated when conflicting opinions collide and especially when egos emerge.  But who is right in this wrestle for truth?  I would venture to say that in most cases neither of the brokers can be right!  They may be close, but in finalizing the negotiation process there is usually an averaging of their opinions when the buyer finally negotiates to purchase at a price they are willing to pay.  The buyer’s choice usually ends the bantering.

The truth is that the price one buyer is willing to pay always decides the value of a property at point of sale!  Appraisers don’t decide value, buyers do.  An appraisers job is to assure lenders that the collateral is worthy of the risk, but if the stated value of the appraiser seems anemic to the lender, motivated buyers can always put more skin in the game until a lender is satisfied with the risk factor. Sellers just have to decide to sell (which is usually apparent by the listing agreement) and then decide how much to adjust when the Endowment Effect taints their thought process.

Listing brokers play a huge role in the process of establishing the initial offering price because it is usually their Market Analysis that sellers lean on to set the price of a property.  Too low and it sells too quickly, too high and it can linger on the market.  Listing brokers are frequently pressured to list a property higher than the suggested list price and they frequently bend to that pressure. 

The market analysis process is accomplished when a broker searches for relevant and recent sold comparable properties that help them to form an opinion of value.  Adjustments are made when comparable properties are not exactly like the subject property.  To finalize this comparing process, the broker averages the best comparables to find a price range that is suitable (competitive) for the property under current market conditions.  No matter what the assessor or the appraiser or the broker thinks about value, the buyer is always right.