A current market evaluation compares the recent sales, recent pendings and current listings of homes that are in the immediate neighborhood of the subject house and to homes that are in nearby competing neighborhoods. The author of the market evaluation considers the specific house size, lot size, location, features, style, exterior and interior condition of the subject house being evaluated and the same set of variables for currently competing and recently sold comparable houses. Using the estimate of fair market value arrived at from this exercise the analyst then uses information from Market Reports to determine the trend for the Metro, the state, and national markets. Analyst also has a feel for the trend in the neighborhood and metro area from his or her own experience. - this is about as close as it is going to get to determine the fair market value. - But we cannot rely solely on logic and analysis.
It may make sense to list price a house below its fair market value:
1. By listing a house below market value, it will attract more serious buyers quicker, who will bid against each other therefore driving the agreed to sales price back up to the top of the fair market value range!
2. Even if the price is not returned to the fair market value, the savings to the seller by having a quick sale may be so significant that taking a small hit to the value in price may be fully offset.
It may make sense to price above the market value:
3. Seller may be dealing with buyers who will not agree to an advantageous deal or a fair deal, unless they (the buyers) have a concrete sense of having had a victory in the negotiations.
For example, a buyer may feel prouder psychologically if they have negotiated $30,000 off of a seller who is $30,000 overpriced over fair market value than if they bought a house that was listed below market value at list price. We see this psychology at work on consumers every day in retail as stores advertise mail-in rebates and 50% off sales of merchandise.