Sellers must understand market value
Market value is often less than the seller's perceived value of their home. Spending thousands of dollars and hundreds of hours on a water feature in the backyard does not necessarily increase the home's value by the amount invested. It can increase the home's appeal, but not always the value. Market value is different than the assessed value for taxes.
The National Tax Payers Union (NTU) reports that about 60 percent of all properties in the United States are assessed at an amount above their current market value.
Market value is determined by homes that have sold recently in the area. How far the home is from things like schools, shopping, medical services, and work centers also factor in. The impact of future construction projects and road development should also be considered. The local economy is perhaps the most influential factor in a home's market value. Despite the recent housing market crash, it is still difficult for many home owners to accept that real estate values do not always go up year-after-year.
Home value estimators
There are several online Home Value Estimators. While technology has improved the lives of Realtors in many ways, these automatic home value estimators often make their jobs more difficult. Without actually naming any of the available online options, some are better than others, but there is a huge error rate with all of them. For individual sellers, the disparities between these computer generated estimates and an informed opinion of value from a knowledgeable agent are often significant.
When agents discuss market value with their clients, they must learn to incorporate the tax assessed value and estimate from online estimators into the discussion. They can encourage the sellers to view these things as a starting point and to use all available information together for making an informed decision about their listing price.
Why listing price is important
A larger pool of potential buyers: Most interest and activity takes place in the first few weeks a home is listed in the MLS. To maximize the exposure to ready, willing, and able buyers, it is crucial that the price is not too high. Even in a seller's market, qualified buyers should be viewed a valuable. A high list price can instantly scare away potential buyers and result in the home remaining on the market longer than it should.
The price directly impacts days on market: There is no need to add wording like "bring all offers" and "highly motivated seller" when the list price of a home is competitive. Buyers often have spent several weeks or months comparing homes and prices in the area. They know how much house they can get for the same price elsewhere. When a home has an unreasonably high list price, contract negotiations typically take longer and are more contentious. This leads to a reluctance by both parties in working together for a successful closing.
Some sellers are not going to get the sales price they hoped to achieve. As a result, they often resent every penny that is deducted from the sales price (namely the real estate agent's commission) and lowers their net proceeds. When they are prepared well in advance of the negotiations and closing, they have time to understand and accept that reality. They make the decision. A tactful and honest Realtor will go over a reasonable estimate of market value prior to listing the home. Otherwise, the seller can feel misled, trapped, and forced into a situation they do not like.
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