FAIR MARKET VALUE
Fair Market Value = How to sell your property for the best price, in the shortest amount of time with the most favorable terms and conditions.
FACTORS AFFECTING VALUE
> Supply & Demand
> Seasonal Markets
> Mortgage Market
> Economic Conditions
> Political Actions
> Location, Location, Location
METHODS OF EVALUATION
Market Value Approach – Using comparable sales
Income Approach – Used primarily for income properties
Cost Approach – Used primarily for insurance and replacement value purposes
Market value approach is the highest value, estimated in terms of money, which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a willing purchaser in current market conditions.
HOME BUYERS PYRAMID
This diagram shows the segments of prospective purchasers who are likely to want to see your property based upon the relationship of your asking price to its fair market value.
CUSHION FOR NEGOTIATION?
If you want to have a cushion for negotiation you must still have people to negotiate with. If you overprice your property, it is not likely to be shown. If your home is being shown, but not sold, it may be used to make other listings look more attractive.
DON’T OVERPRICE YOUR HOME
- Buyers are aware of how long a property has been on the market. If a property takes a long time to sell, buyers usually attribute that to overpricing.
- Overpricing reduces the response to any merchandising done for the property, and will not produce results.
- Buyers look at prices on many comparable properties. If your property does not compare favorably, it won’t sell.
- Proper pricing will produce an early sale.
- Buyers avoid overpriced homes, and usually do not choose to look at them.
- If overpricing delays a sale, the cost and inconvenience could be prohibitive.
(Examples: Delay in job transfer, payment on two mortgages, wear and tear on your present property, loss of opportunity elsewhere, etc.)
- Top agents don’t show “old” listings.
- Two questions buyer prospects usually ask before viewing a property are:
“What’s the price?” | “How long has it been on the market?”
- The Internet makes it possible for prospective buyers to evaluate homes prior to looking at them and those that are “overpriced.”
- Properties that are reasonably priced create a sense of “urgency” in prospects’ minds.
Homes sell at fair market value. Pricing a home realistically will bring an early sale, fewer inconveniences, and a greater monetary return.