What Is Market Value?
By Craig Lowe
Most people start the process of selling their home by obtaining a market appraisal from one or more salespeople. I have found that people obtain market appraisals and focus mostly on what the agents think the home is worth rather than how they intend to market the home. This is so important to some people that they often make their decision to list based on who puts the highest value on the home. This can be a costly mistake to say the least.
Agents and valuers use recent comparable sales in the area and their own market knowledge to try and pinpoint a likely sale price for your home. While this process is very important, there is no way anyone can be sure of what your home will sell for. If an agent comes back with a price or a price range that is high, there are no guarantees that they will even get close.
Sometimes salespeople may try to “buy the listing”. This is when an agent realizes the owner is going to list with the agent who comes back with the highest price, so they bump their figures up accordingly. When it comes time to sell, they will change their tune completely and provide you with “market feedback” to “condition” you to a more realistic figure.
Sometimes owners will insist on marketing their property from a high price they know is unrealistic. “We can always come down in price.” They often say. This attitude is understandable but unfortunately it’s another pitfall. Chances are if you overprice a home from the start, you won’t even receive any offers to start negotiating with. There are several reasons for this. If yours is priced too high, it will make the other homes seem like a good deal. You may even end up helping someone else sell their house for a premium. Once your house has been on the market for a few weeks, people will wonder why it hasn’t sold and think something must be wrong with it. From then on it gets harder and harder to sell.
These problems are easily overcome by not pricing the property at all but utilizing a selling system that is designed to generate competition amongst buyers.
When you get an agent to appraise you home, it’s more important to look at how they will present your home to the market through advertising and marketing, and how they will generate competition amongst buyers to drive the price upwards and finally what their negotiation skills are like.
Market value is the price that a “willing” buyer and a “willing” seller agree upon to complete the transaction, after all due diligence is performed. Sometimes this is a completely different figure than the agent, the owner or even the valuer think is fair value. I recently sold a property for $90,000 above a registered valuation the owner had done 2 months before the sale. And it was even $40,000 above his dream price – if we had marketed this property with a price, he would have missed out on a small fortune!
If you have been thinking about putting your home on the market, feel free to call me on 021 764 647 anytime for obligation free advice.