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Accurate
Home Values Imperative for Sellers
By
Jim Saccacio, RealtyTrac Chief Executive Officer
As
the real estate market continues to outperform, accurate and up-to-date
home value data is vital for home sellers, ensuring they realize a
timely and profitable transaction.
A
good Competitive Market Analysis represents the best way to obtain
comprehensive and reliable home-value data. The CMA calculates the
market value of a home based on extensive information about the home
and the neighborhood, including comparable sales, local schools
performance and neighborhood demographics.
A
local real estate agent should be able to provide a good CMA. If they
don’t already have an agent, sellers can contact an agent using the RealtyTrac
Agent Network.
The CMA should include a summary sheet that identifies an estimated
market value, and an agent can help dig deeper and interpret the rest
of the information in the analysis.
Of
course, the CMA won’t take into account any renovations and
enhancements to the property, but if sellers are familiar with the
condition of other properties on the comparable sales list, they can
extrapolate somewhat – with the help of a real estate agent – based on
the condition of their home.
A
good real estate agent also can give suggestions about making small,
even cosmetic, improvements that will enhance the property’s value.
Simply planting some flowers or rearranging the furniture or even just
making sure the home is clean can make a big difference when showing
the property to potential buyers.
Avoiding
pricing pitfalls
Traditionally,
it’s considered important for sellers to pinpoint the market value of a
property being sold so that they can set an asking price that allows
them to take full advantage – in their pocketbook – of the fair market
value of the property.
When
setting an asking price for a property, it’s important that sellers
neither under price nor overprice the property. Under pricing is a
common pitfall in sizzling markets that have experienced double-digit
gains in recent years. In these markets, which are more widespread now
than every before, homeowners can underestimate the dramatic rise in
value that has occurred since the home was purchased. This may lead to
an asking price set far below market value. And once the asking price
is set, there’s no easy way to raise it short of praying for a bidding
war.
The
consequences for under pricing are somewhat obvious for the seller.
While they may sell the property quickly, it’s likely that they’ll end
up walking away from the sale with less equity to pocket or to put down
for another property. And if they buy another property, they can’t
count on other sellers making the same mistake and setting a
below-market asking price. The net result: they end up losing ground on
what is probably the biggest investment of their lifetime.
There’s
also a big-picture consequence for pricing and selling under market
value: it will lower the overall value of homes in the neighborhood.
This shouldn’t be the number-one concern of a seller, but the neighbors
will be thankful if a property sells for full market value.
Sellers
should also be careful to avoid the more subtle, but equally damaging
mistake of setting a too-high asking price. Overly exuberant about the
rate of appreciation they’ve observed historically for their property,
homeowners can fall into the trap of setting an asking price based on
speculation, with not a lot of hard data to support that speculation.
If
no buyers bite on an inflated asking price, it’s possible to lower it,
but that’s a scenario sellers would be wise to avoid. Once the price is
lowered, buyers at the very least will assume they have the upper hand
in negotiations. At the worst, they may assume there’s something wrong
with the property that’s forcing the sellers to lower the asking price.
This can end up prolonging the time it takes to get the property sold
and lowering the final purchase price below fair market value.
By
contrast, if sellers find the happy medium between under pricing and
overpricing – with the help of a quality CMA and real estate agent –
they’ll be able to move the property in a reasonable time frame and
receive full market value from the sale. And that makes for a
successful transaction.
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