Three factors that will help you determine a home’s fair market value.
How can you know if a home is priced fairly for the market? Today I’ll share the three things that can help answer that question:
1. A price and condition comparison report. A good agent will be able to provide this report for you. Its purpose is to show comparable sales of similar homes. First, it’ll show homes that aren’t selling, which gives us insight into what buyers consider a fair and unfair price for that type of home. The homes that have sold and closed in the last six months (also included in the report) should tell us what buyers are willing to pay and what banks are willing to loan. The report will also include photography, so you can do an apples-to-apples comparison of the home you’re interested in to the condition of the homes in the report.
2. Days on market. It’s important to compare the average days on market to how long the home you’re interested in has been listed. For example, suppose the current average days on market is about 20 days, and the home you’re considering has been on the market for 60 days. That either tells us the home is priced too high or that there’s something wrong with it’s condition. That would raise an eyebrow for us.
3. An appraisal. Your mortgage lender will require an appraisal when you go under contract. The lender will use the appraisal to calculate your loan-to-value comparison. In other words, they’ll determine if the house you’re buying will appraise for the purchase price, and then subtract your down payment from the appraised value. If the appraised value is lower than the purchase price, you may need to use money out of your own pocket to make up the difference or ask the seller to reduce the price.
If you have any questions or need assistance in assessing a home’s value, give us a call or send an email. We’d love to be your real estate resource.