Don't Make This Home Selling Mistake

Selling your home can be a complex process, and one common mistake many sellers make is not fully grasping the difference between the appraised value and the market value of their property. In this article, we will explain these concepts in simple terms and why they are vital for a successful home sale.

The Dollar Listing Example

Imagine you're selling your house and decide to list it for just one dollar. At this price point, potential buyers are less likely to find faults with your property, such as a dated kitchen or a less-than-ideal location. As you gradually increase the price, more buyers become interested, ultimately leading to the sale of your home at its actual market value. This example demonstrates that the right price can overcome objections and attract the right buyer.

Appraised Value vs. Market Value

To price your home effectively, you must understand two key figures: the appraised value and the market value.

Appraised Value: This is the value assigned by a licensed appraiser. They consider factors like recent home sales in your neighborhood, your home's size, and its age. Appraisers focus on homes that are similar in size, condition, and location to yours. The appraised value provides an unbiased estimate of your home's worth based on objective criteria.

Market Value: Market value is what a buyer is willing to pay for your home. It takes into account subjective factors like current market conditions, demand, and emotional appeal. Market value is influenced not only by recent sales data but also by how buyers perceive your property's worth.

The Example of Age and Square Footage

Imagine you have a newly renovated home that you want to sell. However, when the appraiser evaluates your property, they mention an issue. They cannot consider a recently renovated, 40-year-old home as a comparable sale. The reason is the significant age difference, even though both homes are updated.

This scenario highlights the role of market value. If someone was willing to pay a million dollars for a newly renovated home, why couldn't they do the same for your new home? In this case, the appraiser did not view them as comparable, emphasizing the subjective factors in determining market value.

Why Both Values Matter

Understanding both the appraised value and market value is crucial because they can differ, particularly in a changing real estate market. If your market is declining, the appraised value might be higher than the market value. Conversely, in a hot market, the appraised value may fall short of the market value.

These two values are significant when you receive a high offer for your home. While it may be tempting, if the appraiser disagrees with the price, the buyer might face difficulties securing financing. Thus, it's vital to find a balance between the two values to ensure a successful sale.

Conclusion

In the world of real estate, pricing your home correctly is essential. Appraised value and market value are two crucial figures that should guide your pricing strategy. Collaborate closely with your real estate agent, who should be well-versed in understanding and balancing these values. Remember, the right price can often overcome objections during the selling process. Avoid the mistake of overlooking these essential values, as your sale's success may depend on it.