If you are a home seller looking to put your home on the market for sale, understanding the difference between Market Value and Appraised Value before you price your home for sale is very important for you to acquire the highest and best price for your home in the market at that time.
Your home’s location, features and condition all play a role in determining what your home is worth. Market value is driven by consumer demand that is based on the recent sold comparables and pending comparables. Pending comparables provide information as to what direction the real estate market is heading.
The appraisal value is determined by a professionally licensed home appraiser. Appraisers use methodologies to determine value: cost approach, sales comparison approach or income approach. They have the option to choose the methodology that best suits the situation. The bank requires an appraisal of value before they offer a buyer a loan commitment to finance them for the home.
An example of price vs. value is as such. A home that sits on a treed half acre and private lot with a meandering path through the woods to a secluded open space field owned by the town and deemed recreational; would be very appealing to many buyers who want the privacy and ability to use the extra acreage for pleasure. This property could possibly fetch more money than a similar home nearby that does not offer the abutting advantage, however, the market analysis presented by a realtor would/should consider this bonus when gauging the value for the current market. In determining the appraised value, this abutting acreage provides no value in an appraiser’s calculation.
How does this affect the seller who is pricing a home for sale, you ask? If the seller feels this location alone increases the value of the home over and above the market value the comparables show, and a ready, willing and able buyer presents an offer giving you your desired price; and then your home does not appraise, you’ve lost valuable time on the market and potentially a lost sale. The bank would not provide a mortgage for a home that appraised less than the agreed upon price. It would be too much of a risk for the lender. The Purchase and Sale Agreement has a mortgage contingency that states that if the buyer cannot acquire financing for a mortgage all funds are to be returned.
Three ways how pricing high could cost you money:
It is always advised to price a home where it will show its value. Technology has allowed buyer’s to be very informed and knowledgeable. They have a sense of value online, but gain greater knowledge as they begin the journey into homeownership.
Pantone, the worlds authority on color has released its 2015 Color of the Year: Marsala. Personally, I love the deep, warm and rich color tones of red. The flair and personality!
The current trend for the past few years, and still ever popular, has been the neutral shades of gray. If you are thinking of selling, fresh paint is a necessity and appealing to home buyers; and the gray tones would be just right as a complimentary color to the earthy red-brown tone of Marsala. A perfect rich pop of color, adding warmth into a world of creamy blends of whites and grays.
The best way to add color when you are planning on selling is with the accessories; pillows, throws, pictures, vases, etc. These items can easily be changed out by the new buyer, helping you achieve a better financial return on your investment.
Need help on preparing your home for sale, call or email me, and together we can create a plan of action.
Want to know where your home is positioned in today’s market, please call me.
Most sellers today must sell their current home before they can purchase a new home. The proceeds from sale #1 are used for sale #2. This is referred to as a “piggyback” sale. If you are fortunate to have found a home and buyer at the same time, consider yourself very lucky. Often times, the closing for #1 is in the morning and #2 in the afternoon.
Recently, I listed a home for a client who had found her dream home first. Understanding the short window of opportunity she had to capture a buyer in the real estate market at this time provided a challenge in preparing the home for sale. An undertaking that took her 3 weeks to complete, would take the average person a few months. She was totally motivated!
After a few weeks on the market, an offer was produced and the grit of the transaction that lay ahead was revealing itself. The interested buyer had their home on the market with an accepted offer, however, a home inspection by their buyer had not been done just yet. Furthermore, their buyer was preapproved for a USDA loan, a mortgage option with an exacting underwriting process. Not a type of loan you normally see, but the option this buyer chose to go, most likely for personal reasons and beyond anyone’s control.
After an in-depth conversation between me and the buyer’s agent about the viability of their buyer, my client decided to engage her buyer to allow her the opportunity to acquire her dream home.
So, now we have six sides of a real estate transaction with four realtors involved, and as a realtor® I have a fiduciary responsibility to protect my clients personal information and deposits while helping them achieve their desired goal. Therefore, limited information can be shared to get you to the end result without compromising the client.
Once this boat sets sail, there can be upwards of 16 additional professionals involved in this sale – buyer, seller, loan officers, home inspectors, appraisers, attorneys and contractors, if needed, so careful orchestration was paramount in coordinating the contingency dates and terms (including price) in the offer.
When managing a sale transaction, the cooperating realtor is now my best friend. In a regular single sided transaction emotions can and do run high causing the possibility for the deal to derail. With so many touches here, you can imagine the need for patience, awareness and sensitivity of all the parties situation. The offer deadlines approach fast and I am not a supporter of allowing the need for an extension. Extensions are an opportunity for the deal to break, so communication and coordination are key elements in keeping the transaction together.
Fast forward … the 6 sides of the deal came together with multiple hurdles along the way that we were able to overcome. Two that I can share were the need for additional negotiations for unexpected home inspection issues on two sides of the transaction and the banks diligent underwriting process requiring the parties to jump through additional hoops. This didn’t cause any delays in meeting our required deadline, just a little more stress.
The looming threat of the foundational buyer, the one with the USDA loan, not being able to receive their commitment letter was with us every day from the beginning. The final walk throughs were scheduled and the closing date came, but an unexpected twist changed things for some of the parties. Was the looming threat of the first buyer with the USDA loan going to be the structural crack that brings the multiple home sales down?
Rent vs. Buy | Which is Cheaper for You?
As we enter into the fall season, I’d like to start off with some numbers. There is about a five months supply of single family homes on the market right now in Franklin, and four months supply of condos. That means that if no more homes came on the market in Franklin, it would take five months and four months respectively, to sell our inventory. It is still very much a buyers market.
As always, if you would like more detailed information on your town, please send me an email and I will happily gather the information for you. Thank you.
© 2015 Jean Curley, Realtor. All Rights Reserved.
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