If you live in Houston and surrounding burbs and decide on selling your home, the biggest obstacle involves determining the perfect price. Price your home too high? It may sit on the market for months. Price it too low? Receive many quick offers… But discover later you could have received thousands of dollars more.
Fair Market Value
Here is your theory…
You purchased your home five years ago for $100,000. Since then, you cultivated a lush garden that surrounds your above ground pool. You have also added a deck, screened porch and basketball net for the kids. You have painted the interior of your home in the new deep jewel tones of navy, red and emerald green. All in all, over five years you have put about $12,000 into these upgrades. Estimating that your property will increase 5% a year, you believe that about $140,000 should be right…
Wrong. This is not the fair market value of your home. It may be want you want…. But it is not the fair market value.
If you have a professional realtor working for you in Houston like Big State Home Buyers, they will perform an analysis of how much similar homes in your area are currently selling for and how much they have sold for in the past few months. In this analysis they will take into account square footage and amenities. Perhaps two homes that have sold had open carports and yours has an enclosed garage. This option can increase your fair market value.
What area in Houston do you live? Is the area in flux? Do you reside in a preferred school district? Is the community growing? Has the area experienced an increase in crime? Are homeowners are hurrying to move out? A professional realtor will research and find out all the intangibles that can affect the fair market value. The fair market value will typically not be your asking price, but it will give you a basis on what the lending institutions may be willing to invest in your property.
There are so many factors that go into an asking price that this is the one area that utilizing the skills of a professional can prove to be invaluable. A point you must remember is that everything is negotiable.
Why are you selling your home? Are you moving up to a newer, larger home or do you have to make a quick exit due to financial reasons? The answer can affect your asking price. Normally an asking price will be 1% to 3% more than what you actually want so there is wiggle room and the buyer can negotiate and feel he has received a good deal. If the market is hot and you put in your 3% bargaining range, it could sell fairly quickly. However, if the market is soft, you will not be moving any time soon. If you need to make an immediate sale, your home has to be priced for an immediate sale.
As far as all the upgrades you believe you made to the property, most of them have been made to improve your quality of life. The cost of many items you add to your home cannot be recouped at 100%. Some are not valuable to a potential buyer at all. Anytime you add square footage that is under a roof with heating and A/C will increase the value just because of adding more room. The rooms in the home where you can get more bang for your buck are the bathrooms and kitchen. These rooms are hot in today’s real estate. How you paint the interior can be a distraction rather than a positive point for a potential buyer. An in-ground or above ground pool can be a negative for a family with small children.
As discussed, you have the fair market value of your home that has been determined by a Houston real estate professional like Big State Home Buyers. You have a price in mind that is a compilation of the reasons for your move and how quickly you need to sell. You now have that range in which to price your home. If time is on your side, you can price it with your 3% negotiating variance.
Unless your neighborhood has taken a turn and is indicating and upward trend in the market, be prepared to wait. Ask your realtor what is the average time from listing to sale in your area. It is almost unheard of now days for a potential buyer to walk right up and offer you an asking price unless you have priced your home low for a very quick sale.
If the price is right, whether it is for a conventional sale or a quick sale, you have an advantage over those in your neighborhood that have not done the homework. With a conventional mortgage, the lender will send its own appraiser to qualify the asking price on your home. The appraiser will be looking at the same things your real estate professional did. If the appraisal is on the mark, the bank will lend the money (if your buyer qualifies). If the appraiser goes back with a value far less than you placed on your home without help from a realtor, all your hopes have been dashed. The prospective buyer will have to make up the difference between the actual appraisal and your asking price – which is unlikely. The potential buyer will know you have over-priced your home.
For more information on how we can help with your home, call us.