Home >>> Pricing Your Property
The market analysis is prepared by Team Discover to assist you in forming an opinion about the FAIR MARKET VALUE of your property as of the date of the analysis. This analysis is based strictly on properties that can be considered similar to yours and has been specially prepared for you over the last few days.
How It Works
By carefully studying the comparable property locations, features, and the terms under which they are offered, we can develop a clear picture of the potential market for your property.
By looking at the properties currently listed, we can see exactly what alternatives from which a serious buyer has to choose. By looking at similar properties recently sold, we can see what homeowners have actually received over the last few months. This is the acid test that is used by lending institutions to determine how much they will be willing to lend a buyer for your home. While we naturally want top market value for the home, we can agree that there is a point where the price would be too high. By looking at homes that didn't sell, we can accurately determine that price point and be careful not to get too close to it. By doing our homework diligently, we can get the maximum dollars in a reasonably short period of time.
Definition of Fair Market Value
Fair Market Value for the purposes of this opinion of value, is defined as follows:
"The price, estimated in terms of money, which a property will bring if exposed for sale on the open market, allowing a reasonable time to find a purchaser who buys with full knowledge of uses and defects of the property, all of the uses to which it is adapted and for which its use is suitable, neither buyer nor seller compelled to act."
The definition of Fair Market Value is often interpreted as: “The price at which a willing seller would sell and a willing buyer would buy: neither being under normal pressure."
Opinion of Value
The single most important factor in the marketing of real property is the opinion of value.
Property that is priced too high will sit on the market and become "shop worn". Buyers who may have purchased the property at a realistic price will not seriously consider it and will buy properly priced property. Property which is priced too low will sell quickly but the Seller will not realize the true value from the sale.
Ideally, the property should be priced at COMPARABLE MARKET VALUE. Studies continue to show that a property listed at 15% over market value has a 20% probability of sale; 10% over market value, a 30% probability of sale; 5% over market, a 50% probability of sale. Properties priced at market value have a 95% probability of sale.
The method most often used in evaluating single family homes is the COMPARABLE METHOD. Property is worth what a buyer is willing to pay for it, and this is determined by the laws of supply and demand. These two factors are evaluated by comparing the home with other, similar homes that have recently sold within the market area, with appropriate consideration given to amenities, lot size, condition and financing terms.
The resultant range or figure is what is known as the
COMPARABLE MARKET VALUE.
The Marketplace
Buyers select homes by comparison shopping.
Comparison Shopping Dictates...
If two or more homes of the same size are on the market in the same area, for the same price, the one in the best condition will probably sell first.
If two or more homes of the same size are on the market in the same area, in the same condition, the one with the best price will probably sell first.
If two or more homes in the same condition are on the market in the same area, at the same price, the largest one will probably sell first.
If two or more homes of the same size are on the market for the same price, in the same condition, the one with the best location will probably sell first.
Key Market Factors
How long does it take to sell a home? There is no easy answer - some homes sell in a few days, others may take several months. Recognizing the key factors influencing a sale can give you significant control over market time.
The proper balance of these factors will expedite your sale:
Location...
- Location is the single greatest factor affecting value.
- Neighborhood desirability is basic to a property's fair market value.
Competition...
- Buyers compare your property against competing properties.
- Buyers interpret value based on available properties.
Timing...
- The real estate market may reflect a seller's market or a buyer's market.
- Market conditions cannot be manipulated; an individually tailored marketing plan
must be developed accordingly.
Condition...
- Property condition affects price and speed of sale.
- Optimizing physical appearance and advance preparation for marketing maximizing value.
Terms...
- The more flexible the financing, the broader the market, the quicker the sale and the higher the price.
- Terms structured to meet your objectives are important to be successful.
Price...
- If the property is not properly priced, a sale may be delayed or even prevented.
- Reviewing Intracoastal's comprehensive market study assists you in determining the best possible price.
Effects of Financing On Market Value
Financing is a major factor affecting the market value of a property. Plentiful financing at low interest rates increases buyer demand for property. Conversely, high interest rates severely affect the ability of buyers to afford monthly payments.
Many sellers assist with the financing through 1st or 2nd lien financing, buy-downs and wrap-arounds. These techniques usually affect the Seller's final sales price because they are not equivalent to an "all cash" transaction. The seller must wait to receive the full purchase price and assume greater risks, including the possibility of the buyer defaulting on payments.
To appreciate the equivalent cash value concept and the many combinations that can occur with seller-assisted financing, you need to understand the following principle: A dollar received today is worth more than a dollar received one year from today. In today's real estate environment, this means that an all-cash sale at a lower price may be more beneficial than a higher price.
An Owner-Financed Transaction
For example, you could carry back a second lien for $100,000 at 10% per year, interest only, with a balloon payment at the end of a ten year period. Another alternative might be to invest the $100,000 from an all cash transaction at 12% interest per year over the same time period. Because of the difference in the interest rates, these two transactions are not equivalent, and the carry back arrangement will cost $11,600. (This cost is calculated by converting the monthly payments and the balloon payment into equivalent cash value terms. If you lowered the sales price by $11,600 for the all-cash transaction, these two alternatives would be financially equivalent.
Two of a seller's serious concerns are the possibility of a buyer defaulting on monthly payments and buyer inability to meet a final balloon payment. One effective way of reducing such concerns is for the buyer to make a substantial down payment, thereby decreasing the seller's risk of loss in case of default. A note and deed of trust can be an excellent investment if properly structured.
The principle of today's dollar versus tomorrow's dollar is significant because it demonstrates the difference between an all-cash sale and one which requires the seller to provide financing for the buyer. It is important that you consider the effect of financing on market value when contemplating a sale. The highest sales price may not produce the greatest return. You may wish to consult your tax accountant or attorney to determine which terms or conditions would be to your advantage.
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