Pricing Your Home To Sell
Correctly pricing your home to sell in any market can be a challenge. In a declining market it becomes more difficult and in the current market it can be impossible to define Fair Market Value! Here’s why. Fair market value is defined by a willing, knowledgeable Buyer that in unpressured to purchase from a willing, knowledgeable Seller that is unpressured to accept a Fair Market Price. With the cumulative pressure of roughly 30% of homes for sale being HUD homes, Foreclosures, Deed in lieu, REO’s, Short Sales and sellers with financial distress this does not qualify as unpressured Sellers. Reality is that there is No Fair Market Value only Market Value.
Unless someone is buying cash the value of a home will be determined to a large extent by the Lenders willingness to finance a given property as determined by the appraisal. The appraiser will need a minimum of 3 similar homes as close to the subject property that have sold recently. If 2 of the comparable homes happen to be foreclosures you may have a value issue or basically a dead transaction. Buyer an Seller may both agree that the value is not fair yet it is still the market value. Even the lender may realize that foreclosures in the area sell for 15% below market but unfortunatle the appraisal is the value that will determine the financing!
Forget what you think your home is worth. Forget what the neighbor sold his home for a year and a half ago. Forget what you paid and forget what you owe. These have nothing to do with your value today. You do need to look at all the comparable sold data and your current competition and honestly come up with a range of value that is realistic. Once you set your price and it is tested for say 1-2 weeks and you have no traffic you are probably too high and need to reduce quickly espescially if the area is still declining. The drop needs to be significant enough to get ahead of the market and be noticed. Buyers are looking for the deal and a home that is in top salable condition at the right price will still have competing of
Next you want to look at where you want to be. Remember that now you are the Buyer! It is quite possible that you will be able to gain more on your purchase than you lost on your sale and at the end of the day you very well may have come out ahead. Be open minded and flexible. Look at creative financing and possible seller assist as a way to help close the gap.
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By Bill Frantz