Who Determines How Much Your House is Worth?

Your house is very special to you - no doubt it holds many warm memories, but buyers who are looking at your house have just looked at 20 houses and your house is just number 21. It's no more special to them than number 12 or 18 were. Therein lies the challenge when thinking about pricing your home.

In very basic terms: Real estate is a commodity, not a product.

With a product the manufacturer makes something, then establishes the price it will sell for. They advertise it, and the public either buys the product or not at that price. Think clothing or furniture in a store.

With a commodity, the sellers set an "asking price" and then buyers decide their "bid price". The buyers assign their own value based on two things: 1)what is happening in the market (prices fluctuate daily and are influenced by supply & demand) and 2)what are their perceptions of the value of the exact features and benefits inherent in that commodity. The buyer’s perception of value determines what your property is worth to the potential buyer. Think auction.

Also, with all commodities and especially real estate there are two market trends – either appreciating or depreciating which depend on the laws of supply and demand. When fewer properties come on the market than go off, there is a shortage of inventory and prices go up ... this results in an appreciating market. When more properties are coming on the market than are being sold, there is an oversupply of inventory, and prices go down ... this results in a depreciating market. It will probably come as no shock to you, but we are currently in the third year of a depreciating market.

Your potential buyers are comparing your home to similar houses in your town. They are visiting other homes for sale that are comparable in size, style, condition and location. They see what your competition is priced at, and are also working with their Realtor to see what comparable homes sold for in recent months. Putting all of their observations and data together they are determining the fair market value of your home. Hopefully you too have done some research and have come up with a reasonably similar fair market value and price your home accordingly.

The bottom line is: your buyer is an educated consumer and in real estate the consumers set the fair market price of a property. If you price your home based on your emotional evaluation of how "special" it is, and not what it is worth compared to similar ones in the eyes of a buyer you will lose time and money. Yes - money. Studies have shown that overpriced homes actually sell for less money (when they do eventually sell) than if they had been priced correctly from the start.

Of course your home is priceless to you, but to the homebuyer it is not the only choice out there. Use your Realtor's experience and resources to help you determine the value of your home to a buyer. Doing this is the first step to a successful sale. If there are any other questions you have about this, or any other real estate concerns or needs feel free to contact me, Mike Hunter at 978-580-1069. Laviva Online Store

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