08.28.08
The Market Determines Value…Not what the Seller Owes
When I talk to homeowners about selling the property they own, we always discuss value. I first prepare a Comparative Market Analysis (CMA) for the subject property. Because market value has been changing over the course of the last 18 months, I have had a lot more people say “we HAVE to walk away with x” or “well, we owe x, so we need to list for x”. It’s important to remember that our monetary obligations have nothing to do with what a qualified, able-bodied Buyer will pay.
So, how do we determine what the market will support? First of all, we look at what has been selling in the last 4-6 months in the surrounding area(s). If comparable properties are found in the subject property’s neighborhood, then we will not look in other neighborhoods (even if they’re close). We then make adjustments if they are necessary. For example, if the subject property has an additional bathroom, then we would credit the property for an improvement over the comparable property.
We can look at the “active” competition to see how it may affect marketing efforts. However, we don’t look at the “active” competition to determine value. Others may have their homes listed at unrealistic values. If a Seller prices their home based on the prices of those around them, they may never see a showing. Or, they may see showings, but no offers.
The key to determining value is to set aside any expectations or pre-conceived notions about the market and evaluate the data. Buyers are showing us every day what they are willing to act on. They are showing us what types of discounts they expect for a home in less-than-stellar condition. They are showing us that short sale and foreclosure properties are REAL competition for resale. It’s a time to be competitive. Selling a home now is a price war and a beauty contest. If a Seller keeps this in mind, they can make a move happen. Call me today if you’d like a pricing analysis on your home.
