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When homeowners start thinking about selling, the first thing they want to know is, “How much can I sell my house for?” Your real estate agent's task is determining the fair market value with a range of prices from low to high. The spread between the two values typical is not large and only leaves a little wiggle room for the seller to negotiate.
Determining the Value
The challenge is that there is no one value for a home on the resale market. Several values go into determining the number. These can include the assessed value (what the local government taxes it on), the appraised value (what a certified and licensed appraiser determines it's worth), the market value (this can go up or down depending on supply and demand) and what the owner needs from it in order to move to the next place. Even among appraisers, the same house might have several different values depending on what that appraiser noted; although, they’re usually fairly close.
The Homeowner’s Price
When a homeowner has a price in mind that they’ll sell for, it may come from several factors:
- How much they owe on the first mortgage
- Whether or not it has a second mortgage or HELOC (home equity line of credit)
- How much they originally paid in the down payment and closing
- What they’ve spent in renovations and upgrades
How Your Agent Determines a Price
A professional real estate agent may give you an estimate of the market value of your home within a range. These numbers come from comparable residences in similar condition, homes that sold recently and the prices of homes on the agent’s MLS. Additionally, if the agent knows that a bidding war might happen, they’ll factor that into the suggested price too.
How Overpricing Could Hinder a Sale
There are several reasons that overpricing your home might hinder a sale. Here are the main ones:
- Your price puts your listing outside the search parameters of potential buyers. Even if you’re willing to negotiate and come down a ways, a buyer won’t know to ask because your home is not on their radar.
- If your home does come up in a search, it will be because the buyer is looking for homes in that price range. But if yours fails to match similar homes in their price point, yours will drop to be the last one they look at.
- An overpriced home can spend longer sitting on the market, languishing there as the MLS adds numbers to the “days on the market” category. Often, buyers assume a home sits unsold on the market because there is something wrong with the property or the seller is difficult to work with.
If you need to sell your home quickly, and for top dollar, trust your real estate professional to guide you in setting the price.
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As the home buying process nears the closing, both buyers and sellers need to prepare for the appraisal. This often the last step the lender requires before approving financing for the buyer, so it’s an important part of the home sale process.
What is an Appraisal?
An appraisal is an unbiased, professional evaluation of the value of a home or other piece of real estate. It takes a look at the property, its physical characteristics and the local market conditions to determine the fair market value of a property.
How Is an Appraisal Different from an Inspection?
The appraisal is similar to an inspection, but it is a separate step. In an inspection, the inspector is looking at details about the home and its condition that make it safe or unsafe to live in. The inspector is also comparing the home to current building codes to make sure the home is up to current safety standards.
An appraiser is simply looking at the home’s market value. The appraiser has rigorous training to learn how to evaluate property values and puts that to work to evaluate yours.
How Does the Home’s Appraisal Impact the Home’s Sale?
Lenders want to know that they’re lending no more than the home’s actual value, because they don’t want to have a borrower upside down in a home loan at any point. If the home does not appraise for what the buyer is offering, the loan amount will not be approved. This either means the buyer can walk away or the buyer and seller can renegotiate the terms to match the appraised value.
How to Improve the Appraisal Value on a Home
Sellers who are worried that a home may appraise too low can take some steps to improve the appraisal value. Repairing cracks in the plaster or stains on the wall, for instance, before the appraisal can help improve its value. Odors and staining on the carpeting should also be addressed before the appraiser comes. Improving curb appeal and showing details about improvements and repairs that are high in value are also helpful in boosting the home’s potential value.
The home appraisal is a critical step, and often one of the last hurdles between initial offer and closing. Both sellers and buyers need to understand this step, so they can avoid unhappy surprises when the appraisal report comes back. If a home is competitively priced and well taken care of, the appraisal shouldn’t be a problem in the overall sale of the home.
