So you’ve decided to do some home selling. Congratulations, this is an exciting business you’re getting yourself into. Whether it’s selling your parents’ house, your aunts’, your close friend’s, or even your own home, there are some things to consider before you can start marketing the house. One of which is how to set the price.
It’s really important to take time before you finalize your home selling prices. If the price is too high, the home will stay in the market for too long, waiting for someone who can afford it. Even if you chose to reduce the price later, it would show the potential buyers that even the seller realize that the home selling price was too high (and probably still is). But if the price is too low, this would easily sell but eventually brings damages to the sellers’ net expectation!
If you’re selling your own home, the chances are you’re going to want to set the price as high as possible. This might seem like an obviously silly thing to do, but it happens to a lot of people who either cherish their house too much, or are simply not aware of the real value.
The first case is a lot easier to handle. Remember that apart from the location, your home selling price is a major consideration in purchasing. So no matter how much you love your house, try to set a realistic price.
Some things that might decrease (or increase) your home selling price are as follows:
a. Location. Sorry, this one’s a definite. A home in a more desirable area will cost more than less desirable ones.
b. House condition. A good maintenance shows that this home is worth being looked after.
c. Surroundings. Check out schools around the house and their quality. See how the weather would take effect. Watch those pesky neighbors. These things, though seemingly miscellaneous, applies to buyers and can affect the overall home selling price.
d. Extra features. Does the house own something the market is demanding? Does your home have a pool or a beautiful patio? Don’t hesitate in taking them into account of setting the price. Be realistic, though – a dusty, never-used fireplace, no matter how classy, will do nothing to your home value.
The second case – where you’re not sure of your house’s value – is a bit more difficult. You might want to read some home selling advertisements to see the price of the houses similar to the one you’re selling.
To help you finish off with an ideal home selling price, some standardized methods of price setting have been established. A Comparable Market Analysis (CMA) is “a comparison of similar properties in the same general area that compares actual sold prices”, in other words, comparing your house to similar ones to get a rough value. Nowadays Real Estate Agents can do CMA for you, and you can even do it yourself by the help of some websites.
Real estate appraisal or property valuation is the process of determining the value of the property on the basis of the highest and the best use of real property (which basically translates into determining the fair market value of the property). The person who performs this real estate appraisal exercise is called the real estate appraiser or property valuation surveyor. The value as determined by real estate appraisal is the fair market value.
The real estate appraisal is done using various methods and the real estate appraisal values the property as different for difference purposes e.g. the real estate appraisal might assign 2 different values to the same property (Improved value and vacant value) and again the same/similar property might be assigned different values in a residential zone and a commercial zone. However, the value assigned as a result of real estate appraisal might not be the value that a real estate investor would consider when evaluating the property for investment. In fact, a real estate investor might completely ignore the value that comes out of real estate appraisal process.
A good real estate investor would evaluate the property on the basis of the developments going on in the region. So real estate appraisal as done by a real estate investor would come up with the value that the real estate investor can get out of the property by buying it at a low price and selling it at a much higher price (as in the present).
Similarly, real estate investor could do his own real estate appraisal for the expected value of the property in, say 2 years time or in 5 years time. Again, a real estate investor might conduct his real estate appraisal based on what value he/she can create by investing some amount of money in the property i.e. a real estate investor might decide on buying a dirty/scary kind of property (which no one likes) and get some minor repairs, painting etc done in order to increase the value of the property (the value that the real estate investor would get by selling it in the market).
So, here the meaning of real estate appraisal changes completely (and can be very different from the value that real estate appraiser would come out with if the real estate appraiser conducted a real estate appraisal exercise on the property).
A real estate investor will generally base his investment decision on this real estate appraisal that he does by himself (or gets done through someone). So, can we then term real estate appraisal as a really real ‘real estate appraisal’?
