Just the other day my partner and I where showing a new client homes in the Highlands neighborhood in Denver CO. The Highlands neighborhood is a very desirable neighborhood in the Denver real estate market, due to the bungalow style homes, urban feel, local shops and restaurants and proximity to Downtown Denver.
Unlike many real estate markets in Denver and throughout the country, the Highlands neighborhood is one of the magnet communities that have experienced double digit (13 percent) home appreciation over the last year. The problem with the high appreciation in a market like the Highlands neighborhood is that you get inexperienced agents that are unknowingly providing their buyers and sellers wrong advice. This wrong advice could lend itself to a home buyer paying more than the house is worth and unforeseen negative home appreciation for many years.
My client that I spoke of in the beginning of the article was working with an inexperienced agent who did not understand the Highlands neighborhood. However, they were fortunately also working with one of the Colorado House Finders’ appraisal consultants well versed in the Highlands community.
The situation with our new client occurred when their inexperienced real estate agent made an offer on a house in the Highlands neighborhood that was overpriced by another inexperienced real estate agent. Not understanding the Highlands market, this agent did not have the competency to advise the client on a reasonable offer to make on the house. As a result, they made an offer on the house that was thousands of dollars over market value. Fortunately, this client sensed doubt in their agent’s competency and as a result contacted one our appraisal consultants. Our appraisal consultant provided a thorough analysis of the subject property and the Highlands neighborhood that clearly illustrated the subject was significantly overpriced for the market.
You are probably asking yourself why the purchase would have occurred and how the property would have appraised? The answer is a result of the blind leading the blind. Unfortunately, there are many Realtors and appraisers who believe that if a client is willing to buy a home for a certain price, then the home must be worth that price. Due to the nature of the Highlands neighborhood with properties in various stages of condition, differing styles and value differences relative to the homes proximity to local shops, and an inexperienced appraiser guided by an inexperienced Realtor could have very easily had the house appraise at an inflated listing price.
It is extremely imperative that during a buyer’s market you work with a real estate agent that has experience in a local real estate market or the ability to thoroughly analyze a real estate market. Much like the case with our new client, they would have unknowingly purchased the house at $40,000 over market value, simply because they were misrepresented by an inexperienced real estate agent.