Clients often ask, “How much under the listing price should we offer?”
The best way to understand market value is through comparative research. Professional real estate brokers review and study at least 40 to 60 listings, visit 10 to 20, and inspect 5 to 10 properties to develop a sense of relative worth for properties in a given area.
Additionally, a professional appraisal factors into determining the fair market value of the property. An appraisal protects you because lenders want to make sure that you don’t overpay. If the value does not meet the sale price in the eyes of the appraiser, they’ll let you know. At that time, the broker can renegotiate the sale price or void the agreement and refund your earnest money deposit.
There are four basic factors that influence how sellers price their property.
1. Sellers Get Poor Advice
Some real estate agents inflate the value of the seller’s property in an effort to obtain the listing. There’s a natural tendency on the part of sellers to list with the real estate agent who gives them the promise of the highest selling price.
When properties are overpriced, they – Stay on market longer– May not sell– May sell for under fair market price, after sitting a long while
2. Sellers Set an Unrealistic Price for Emotional Reasons
These sellers believe their property is worth every penny of their asking price for personal reasons. Sometimes they lose their objectivity and focus on features that seem more valuable to them (rather than to the buyer). For example, “I have the best views of the mountain.” “This barn cost me $478,000 to build and I want every penny back.”
Additionally, some sellers feel it’s a good idea to leave a little “negotiating” room in the asking price.
3. Sellers Price their Property at Fair Market Value
These sellers carefully and realistically study other properties for sale, and consult with a real estate professional. They price their property competitively, and it usually sells quickly at (or very near) the asking price.
4. Sellers are Motivated to Sell
When sellers want a fast sale, they price their property below fair market value. These properties usually sell right away, at or above the listed price. There are usually competing offers.
We’ll help you determine the fair market price for any property. Our job is to ensure that you have the tools and information you need to make an informed decision. We’ll help you every step of the way.