Determining Fair Market Value
Determining “Fair Market Value”
How to determine “fair market value” is a common concern for our customers. In fact, it is the most important decision you will make as a private seller.
Do not take this decision lightly.
Fortunately, you have several options to help you with that decision. Listed below are the options that you have to determine your asking price. You can ask any price you want; however, financial institutions make loans based on the sales price or appraised value - whichever is lowest.
Price it right, maximize exposure,
and it will sell.
1. Do your own homework.
COST TO SELLER: Free
This approach involves some work on your part. Simply research the neighborhood or area you live in to find out what homes have actually sold and for how much. CAUTION: Do not use “listed price” as a comparison, only use actual SOLD prices. Ask your neighbors what homes have sold, and for how much (they may know more than you think). Compare the prices of sold homes in your area to your home, and make “adjustments” for any differences such as number of bedrooms, baths or garages, no basement, etc.
WARNING: IT IS VERY HARD FOR A SELLER TO BE OBJECTIVE!
2. Comparative Market Analysis (CMA).
COST TO SELLER: Free
This method leverages the Multiple Listing Service (MLS) data of Active and (especially) Sold homes to determine your value. Depending on the area and the agent performing the CMA, these can be good estimates of value, or sometimes they can produce quite a wide range of values. “Solds” are always the best indicator of value when coming up with a suggested price range. Since homes are only worth what someone is willing to pay for them, the goal is not an exact number, but rather a range of values that the house would be most likely to sell for.
3. Appraisal by a state-certified residential appraiser.
COST TO SELLER: $300-$400
Of all the pricing approaches available to you, we recommend this one. It is conducted by a certified appraiser who has invested years in his/hers reputation to accurately provide fair market values. A certified appraisal can assure you are maximizing price while not overpricing.
THIS METHOD IS THE MOST ACCURATE.
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Don’t assume. Don’t guess. Know what your house is worth! When you know your home’s value you can market your biggest asset effectively.
Experience is Everything! In Michigan, there are 4 levels of licensure. Ask who will be doing the inspection, completing the report, and what license they each hold.
Location! Location! Location! Just like in Real Estate, in appraising location is everything! Make sure the appraiser you hire is familiar with your area.
Purpose. Does the purpose of the appraisal change the value of the property? NO! Any number of appraisals of a particular property should yield the same results. However, some appraisers get caught up in giving lenders/clients the answer they are looking for, and lose track of how to actually determine value.
Professionalism. The property the appraiser is valuing is your greatest investment and asset. Regardless of the purpose for your appraisal, you deserve to be treated like a client. This should include promptness, courtesy, accuracy and timeliness.
This is your home... Your investment. The choice is Yours! *The Above information was provided by Kim Miller, President of Landmark Appraising, Rochester Hills, MI |
Common Pricing Mistakes
By Owner sellers usually price their homes too high to start with. They reason, “I’ll price it high and I can always lower the price later if necessary.” This is a drastic mistake!
ALWAYS TRY TO PRICE YOUR PROPERTY COMPETITIVELY RIGHT FROM THE BEGINNING.
If you overprice initially, you will probably be offered thousands of dollars less when it is finally sold, than you would have been offered early on if the price had been competitive.
The reasons for this are simple:
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A property will not sell quickly if it is not offered at a competitive price.
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The most enthusiasm for a newly offered property is during the 1st 2-4 weeks. – Think “New Listing!”
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After the first month or so, an overpriced property becomes “shop-worn.” Prospective buyers lose their enthusiasm and may begin to make negative statements about it being overpriced.
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New prospects know how long a property has been offered for sale, and if more than a month or so, they assume something is wrong with the property.
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Buyers at this late date, knowing how long a property has been for sale, assume the seller must be desperate and will almost always make very low offers.
FACT: Buyers are “market smart.” They know the market. They know how many homes there are in their price bracket. They have already shopped around and know if your home is priced fairly and competitively compared to others.
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Appraisals are very cost effective and our experience has been that they really help home sellers. We highly recommend them. This usually proves to be a very wise investment for a small cost. The appraisal justifies your asking price to a buyer and strengthens your negotiating position. |
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