It all depends on who wants to know. The tax assessor? The insurance agent? The banker? Or, are you going to try to sell it (market value)? The different values placed on a property by the respective parties often confuse home owners and/or prospective buyers. If you've bought or sold a home recently, you probably noticed the real estate agent, insurance agent, tax assessor and bank all had a different idea of it's TRUE value.
First, the key factors you do and don't control. The seller controls the property's condition and price. The seller doesn't control the competition, previously sold homes nearby, whether or not it's a buyer or seller's market nor interest rates. Understanding the key market factors and the proper balance of these factors will expedite your sale. SOLDS… is the single greatest factor affecting value. Neighborhood desirability and recently sold homes is fundamental to a property’s fair market value. COMPETITION…Buyers compare your property against competing properties and buyers interpret value based on SOLD properties. TIMING…The real estate market may reflect a seller’s market or a buyer’s market (current market conditions). Market conditions cannot be manipulated; an individually tailored marketing plan must be developed accordingly along with intelligent list pricing. CONDITION…Property condition affects price and speed of sale. Optimizing physical appearances and advance preparation for marketing maximizes value such as staging. TERMS...The more flexible the financing, the broader the market, the quicker the sale and the higher the price (current market conditions are the exact opposite with very restrictive lending practices). PRICE…If the property is not properly priced in regards to condition & location then a sale may be delayed or even prevented.
Many years ago, I had a colleague, 'Bill' who's buyer, 'Jim' was interested in obtaining a very specific home. Jim called my colleague, Bill, and asked Bill if he could find out about a home at '123 Main St' that was for sale. Bill made the appropriate phone calls to the listing agent and was told the home had, "just gone under contract that morning." Bill reported back to Jim that it was already under contract. Jim told Bill to find out who the buyer was currently holding the contract to purchase and offer them $10,000 to assign the contract to him. Of course Bill was blown away since this doesn't happen often in our business.
Appraisals, in my experience, are the most misunderstood real estate instrument in the business including by professionals. Appraisals do NOT determine the value of a property. (This post will not address appraisals acquired by cash buyers, refinances or sellers. Those too are often misunderstood and hold no validity when a new bank calls for their own appraisal.) This entry is written specifically to help sellers and buyers understand the purpose of an appraisal when a buyer's banker orders one.
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