An appraiser is typically providing an opinion of value for a lender. Does the property meet the lender's criteria? Does the property hold the value necessary to justify the loan?
The market will establish a value for your home based upon the number of active buyers and how much one of those buyers will pay for your property.
Pricing for the market needs to take into consideration the past solds, current pending sales, number of active competing properties, and also how many properties expired without going to contract. The Realtor will also evaluate trends in the marketplace. What is the absorption rate? What are the average DOM for various areas?
Market value results from the forces of supply and demand.
So, in other words, the appraised value may not be the best guideline in estabishing a pricing strategy to go to market. Rather, an evaluation of the marketplace will be the best indicator. Go to market with the price that the evaluation indicates a buyer might pay. Pay close attention to market feedback, and adjust accordingly, if need be.
Deborah Madey - Broker
Peninsula Realty Group, Inc.
I have seen appraisals vary widely and, in many cases, very dependant on sales price. Two years ago a house down the street with 5 acres and over 2000 square feet including a barn was being offer for sale by owner. She had information sheets out there, so I picked one up and it said that she was selling for $200,000. I immediately called her both as a good neighbor and as an agent imploring her not to sell her house for that much less than market value. She stated that she was selling it at the appraised value with a fresh appraisal in hand. Long story short, I listed it for $250K and sold it in 40 days at $245K. Strangely it appraised fine at the $245K cost as well.
Conversely I've seen other situations where appraisals are over what the property is worth.
Bottom line, get with a good agent and have them price the property for you. A local agent with area knowledge will more than pay for themselves in this task alone.
RE/MAX Bryan-College Station
If the appraisal was to determine FMV, I would price the property just slightly under the appraised value and advertise that the asking price is under the recent appraised value. Pricing above the appraised value does not make sense in our current market as the property has to appraise for the buyer too in order for you to be able to sell. If you are one of the lucky people who owns property in a market that still appreciates, then you'd probably be able to get away with listing at the full appraised value. In any event, I would ask your agent to keep you posted of any changes in the market that may require a price adjustment. One more thing, please remember that the value of your property is not determined by how much you need to get out of the property. You mentioned you purchased in 2005. If you were in CA, that would mean that you may have bought at the peak of the market. Many sellers are in denial about the true value of their property because they need to get a certain amount to at least be able to break even. Don't make the same mistake.
Please get 3 Comparative Market Analyses done by experienced Real Estate Agents in your area and compare them with the appraised value of your home. I feel they are more reliable in establishing market value. Usually you will be given a price range. You can start at the high end.
If within a month, there has been little or no activity as far as showings, a price reduction must be strongly considered (5% for example). I am sure your REALTOR will advise you on how to proceed. Again what you lose on one end, you may recover on the other end.
Sue Brown & Stephanie Smith
"Cape Cod's Finest Mother/Daughter Team"
You purchased your house at the height of the market. How close did the appraisal come to your purchase price? How much of a loss can you afford to take? If you are moving to another part of the country, you may make it up on that end.
Let us know how we can help you further.
I only skimmed the answers but would like to ask, did you get the home appraised specifically for the purpose of selling? If that is the case, I would put less value on the advice about value to a lender and more credibility to the appraised value. If however the appraisal was for a refinance, I would give little value to the appraisal for sales price information.
I disagree with the strategy of automatically lowering your price every two weeks to come up with the correct price. I'm sure you will receive a more heated debate over that here soon.
Rita is correct in getting 3 agents to evaluate your property.
Some posters I believe mis-read your time frame. If you HAVE to MOVE in the spring, you should put your home on the market NOW. If you get a contract right away, you would be much better off renting for a while than holding two mortgages for a year if it doesn't sell. If you don't get a contract right away, take it off the market for the holidays and put it back on when your area's market picks up again. An agent will be able to help you with that.
By the time you put your home on the market (I would guess late winter/early spring) your current appraisal will be obsolete. Rather, you should go by current market conditions at that time. The best way to do so is to have 3 agents come in and do a market evaluation for you. If they are doing the evaluation properly they should all be pretty much the same general price. If one is way off, you should try to figure out what makes that one different.
I wouldn't necessarily pick the most expensive evaluation. Like it or not there are agents who will tell you what you want to hear and then once they've gotten the listing from you will start to be more frank about value.
Another thing about value. It's not all about price. It's also about timing. So if it's worth it to you to discount your price a bit, just to get it sold, that can be worth money in the bank.
Also don't be unreasonable when you first put your home on the market. Don't go for pie-in-the-sky pricing. People won't respond. And since new listings get the greatest scrutiny, you want to have desirable pricing when it first hits the market.
Let me re-state your case"
You purchased a home ion mid 2005...let's say July.
You plan to sell in 2008 Let's say in June
What could you do to maximize the price of your home? Is this correct?
First, What are you trying to achieve with your move? And Why is that important? These answers are critical to helping us provide you with solutions.
Second, what is the local market like? If you don't know, you definitely need a REALTOR to tell you.
If you do know, what are they?
Third, what do you need to net?
Throughout the US, most market are buyers' markets.
Depending upon your answer I have a couple of options:
1. Market is going down - perphaps selling now and renting back might make sense?
2. If you bought a fixer, fixing it up might help your next purchase
3. If you bought the "perfect house", this still might help.
4. If you bought at the height of a boom market, it still might work
This is better than HGTV...
You buy a two bedroom, one bath house. Let's say that you add on a bed and a bath (500 s/f)
If a three bedroom, two bath is selling for $300,000, 1200 s/f, equals $250 / s/f
If you add the bed and bath, let's say it costs $100 / s/f, or $50,000 to build
Generally, there are a couple of characteristics:
1. the cost of constructions is generally less than purchase. In our example, taking a two bed/one bath home, compared to a three bed, two bath, is a big jump.
2. If the cost for purchase is $250K,/s/f, and the cost for construction is $100, s/f. that means that , ideally, you would pocket $150- per s/f (500 x $250= $125,000. less the construction costs 500*$100= $50,000. equals $150,000 in profit.
No profit margin is not necessarily linear, this is an example. If you compute the time, effort, inconvenience, etc., into the project, you, the owner, "pay the price", the new buyer, reaps the benefits.
The buyer buys a three bedroom two bath home for $300,000. You purchased a two bed, one bath home for say $180,000, plus $50K for the additional bed and bath, so $230K , sold it for $300,000, you "made" $70,000.
You can certainly do some "paint and cleanup" that will help, but usually nothing pays off like adding square footage. So, time permitting, adding square foot living space trumps most other improvements.
Generally speaking, given your time frame, adding on is the "best return" your time and money. Look at some homes on the market that are what yours "could be". Get some info, then see if the numbers make sense.
I hope this helps.