Determining an accurate market value of your property is the first step to a successful sale. When it’s time to sell your house, the first question is typically, “What is it worth?” The more appropriate question to ask is, “What is the current market value?” The second question should be, “What is my desired time frame to sell?
Price the property too high in hopes of finding someone to overpay will likely result in many weeks or months of fruitless efforts. Price too low and you will likely leave money on the table. Determining a realistic current market value will empower you to get the most for your real estate in a reasonable time frame. Knowledge is power and with an accurate assessment of value, you will be ready to negotiate from a position of strength.
This position of strength may mean standing firm when a buyer attempts to squeeze out another concession or it may mean walking away from an unreasonable offer. Compromising to reach an agreement is often the smart move to make however giving up more than is necessary is anything but smart. You need be aware of your options and know where you are in the negotiation. Otherwise you’re just walking in a fog somewhere between blissful ignorance and wishful thinking. Knowing your best alternative to acceptance of an offer can make a big difference.
A professional appraiser and an experienced professional Realtor use three methods of valuation
- Replacement costs,
- Income approach and
- Comparable sales.
The income approach is appropriate for rental properties. Since we’re focusing on personal residences here, we’ll save that discussion for another article. For owner occupied homes, the primary method used is comparable sales with adjustments to compensate for size differences or the additional bath or screen porch and such. Replacement costs estimates can also impact this estimation of value when closely similar comparable sales are not available.
This process range from rather simple in a homogeneous neighborhood to rather complicated for a unique property.
A key point to remember is that in addition to these closed sale data points, an experienced Realtor will also research other properties currently on the market that could be considered as competition in our efforts to find a ready willing and able buyer for your house. In other words, whereas an appraiser primarily looks in the rear view mirror, a professional Realtor will look backwards and forward. We need to think like a buyer and study our options to purchase a similar home with similar features.
An experienced agent with the expertise to analyze accurately the past relevant sales and current buyer options, will be able to confidently support your asking price. This firm basis will pay off when countering the crafty arguments presented by buyer’s agents to justify unrealistic offers. (No offense here to buyer’s agents, they are simply doing their job)
In summary, determining an accurate market value for a property to be sold is the first step in achieving positive results. It’s not always easy but it is always important. The process is part science and part art. The art part is often difficult to explain as it tends to be drawn from that deep well of experience. (for more info on this topic, read “Blink” by Malcolm Gladwell)
Duncan Townsend, BIC
Dana Properties, LLC