Sellers must look at their home through the eyes of a potential buyer. The very first and clearly the most obvious factor noted is list price; how does the home compare to others like it. Most consideration is given to recently closed homes, ideally within the last six months. Remember, an appraiser is going to validate that offer price.
- buyer and seller are typically motivated
- both parties are well informed or well advised, and acting in what they consider their best interests
- a reasonable time is allowed for exposure in the open market
- payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto
- the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale”
Market value has NOTHING to do with:
- What anyone thinks is the home is worth
- What the acquisition cost of the home was
- What is owed on the home
Market value is influenced by:
- Value of COMPARABLE homes in the immediate area (comparable is “a reasonable alternative purchase to the subject”. Common sense should dictate what that means!)
- Condition of the home
- Characteristics of the home
- Trends in the immediate neighborhood and area
- Local and national economic conditions
- Many agents will overestimate value to get a listing, 30 days later they will begin the “we need to reduce price” routine.
- A reliable evaluation requires more than 3 comps. A standard agent “CMA” is ridiculously ineffective.
- Are there comps closed within 6 months, active and pending comps? Appraisers have to use comps CLOSED within 6 months, are they used?
- Question the agent, why were these homes used?
- Are these homes truly comparable?
- Are there comps from similar competing communities?
Homes priced correctly have a 95% chance of selling; 5% over market a 50% chance of selling; 10% over market a 30% chance of selling; 15% over market a 20% chance of selling. Even if a buyer is found that is willing to overpay, it’s highly unlikely that an appraiser will endorse the contract. So is an accurate listing price important? Is an agent that knows the market important?
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