Coming up with the “right” price to sell a home can be a challenge.

Fair Market Price

The “Fair Market Price” for a home is something that can be confusing to many consumers.

Most of the valuations that a consumer sees are based on different formulas used for estimating valuations for large volumes of homes.  These estimates are general because the cost to estimate homes on a one-by-one basis would be too high.  They do NOT equal what the home is actually worth.

  • The market value from the county auditor is based on figuring out how to pay for large investments in roads and other county and municipal costs. That value is usually based on a percentage of what homes of the same size and location are generally worth based on the number of rooms, the size of the home and any improvements that required permits.
  • The “home value” that Zillow and other real estate listings show are also based on the same factors – location, size and improvements – but are general numbers, NOT what the home is actually worth.
  • Cost Basis is the amount that current owners paid/have invested in it/or need out of it and has nothing to do with what the home will sell for.

What is the ACTUAL Price at which the Home should be Priced?

There are three components that are used to determine price.

  1. Comparable Sales (generally called “comps”)

Comparable sales show the price at which homes of similar size and amenities recently have been sold for in the area. This is the most important factor that banks use to determine how much they will loan on said properties.

  1. Supply and Demand

When the inventory (the number of homes available in a certain area) is low and demand is high, it puts upward pressure on prices.  This situation causes a more competitive market for buyers, who are willing to pay more for a home in that area.

The reverse is also true.  When demand is low and supply is high it puts downward pressure on prices.

  1. Motivation of the Seller

-This is by far the number one factor in determining price. The greater the motivation of the sellers, the more likely they are to make a deal.   It’s important to keep in mind this can change by the day.

The primary reason for being motivated occurs when the sellers want to – or have already agreed to – buy ANOTHER home.

Despite the determination to get what they feel they “should” get for the home or what they need to get out of it, sellers tend to feel differently based on their situation.

The price they are willing to accept for their home can change drastically after they have moved out and now have to make payments on an empty house or for two homes.

As a general rule, it is this desire to move on – and avoid financial stress – that most seriously affects price.