Determining the Market Value of Your Home
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Determining the Market Value of Your Home

A way to determine the market value of your home is to size up the competition. You should be able to discover most of them by just driving down nearby streets and looking for "For Sale" signs. The price spread is the difference between asking price and selling price for most homes.
                        house market value

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Have I become a pretend buyer for a weekend?

A way to determine the market value of your home is to size up the competition. Chances are that at any given time there are several homes similar to yours for sale in your neighborhood. Any real estate agent should be able to tell you about these. You should be able to discover most of them by just driving down nearby streets and looking for "For Sale" signs. If you know a friendly agent, he or she can usually arrange for you to visit these homes so you can see firsthand what other sellers in your price range are offering. (Most agents are happy to do this in hopes of getting your listing.) Very quickly you'll see how much worse, or better, these properties are. And you might get some good ideas about fixing up your home so it shows better. Keep in mind, however, that "asking prices" are not usually "selling prices." Depending on the market, most homes sell for less (or sometimes more) than the asking price.

Have I determined the price spread?

The price spread is the difference between asking price and selling price for most homes. Again, an agent can provide you this information by giving you a list of homes that shows both their asking and their selling price. You can total both figures and then get the percentage difference. In an average market, homes typically sell for around 5 percent less than asking price. In a bad market, that figure can drop to below 10 percent. Of course, in a hot market, most may sell right at asking price, or even higher. Use this information when pricing your home. Keep in mind, however, that you can't arbitrarily set a price you want and then boost it by 5 percent (or whatever), unless your asking price remains competitive. You have to start with the competitive asking price and then work backward to what you'll net out. (When calculating your net, don't forget transaction costs including commission, escrow, and title insurance.)

Have I taken into account recent price increases?

Here's an interesting method of calculating value. You now should be able to come up with three figures:

  • CMA: From your CMA you should be able to determine what recent comparables sold for, thus giving you a price basis.
  • Current pricing: From evaluating current homes on the market you should have a sense of what current home sellers are asking - current "asking prices."
  • Spread: And by comparing previous asking prices to current asking prices, you should have a good idea of the spread.

Thus, assuming the spread stays the same, you can determine if values have gone up or down. It's easy. Say you know the average spread between asking price and final sales price is 5 percent. And your competitors are pricing their homes today at an average of $200,000. You know that they should expect to receive around $190,000 as the sale price (asking price less spread equals sales price). However, by checking the CMA you also know that the average sales price during the past year was $180,000. Thus, you've learned that values in your neighborhood have gone up by $10,000. (Or your competitors are unrealistic in their pricing.)

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Comments (2)

Good info, just to add a little something..in this market with the economy as it is noww, your house is only worth what the seller will pay for it...promoted

Good info, just to add a little something..in this market with the economy as it is noww, your house is only worth what the buyer will pay for it...promoted

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