How do you determine fair asking price for a house?
- May 19, 2021
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Low, high, or list price: How much do you want this house?
Once you’ve determined whether the house is priced right, evaluate your own needs before coming in with your bid. Ask yourself: How perfect a fit is this home? Will you need to make any changes to it? How much might those cost? Is it in your budget? If so, is it at the bottom, middle, or top of your budget?
Here’s when you might want to make an offer that’s lower or higher than list, or right at the asking price.
What’s the list price?
Now that you’ve analyzed the comps to determine what you objectively believe the market value spectrum is, see how this matches up to the list price the sellers have set.
Have they priced the house on the low end of the spectrum in a hot market to potentially attract multiple offers? Are they fishing to see what they can get and have set the price at the high end, or even above the spectrum? Are they making significant price drops regularly?
Most importantly, assume nothing. While analyzing the sellers’ strategy can give you some insight into their head space and potentially help determine your offer price, don’t overthink it. No one knows the sellers’ true motivations and sometimes not even the sellers themselves know just how far they are willing to bend until they see an offer in front of them. Click here for more details Please.
A low offer might be appropriate…
If you’re in a solid buyer’s market, sellers will be more likely to accept your lower offer — and you’re in a good position to make one. Or, you might come in with a low offer if you’re simply ambivalent about the house — and would only want to score the keys if you could get it at a steal.
Consider coming in low if you think the home is overpriced as advertised — and you and your agent have the comps to prove it. Or come in low if you’re prepared to go very easy on the contingencies.
You might also come in low if the house has been on the market for a long time. Or you might try a low offer if the sellers have already reduced the price at least once. That said, bidder beware: This approach could backfire. Many sellers have a floor they’re willing to accept, and an offer below that number simply won’t get you anywhere.
Offer low if “the property needs some love, and the buyers need to bring it up to today’s world,” Baroni says. “Then they’re probably going to need to come down on their price in order to sell.”
How to Calculate Fair Market Value
Several factors are taken into consideration when a homeowner or a real estate agent is calculating the fair market value of a home. There is no exact formula to determine this amount as the open, free market where a buyer and seller are operating is constantly changing. The pressure to buy or sell, the characteristics of the property, and the market around the property will all play a part in determining the fair market value. The first step to determining the fair market value is to have a reasonable knowledge of relevant facts about a property. Second is understanding the economics of a free and open market, as well as the current activity on the local real estate market. Finally, comparisons between your property and similar properties in your area based on things like age, size, updates or renovations made, and more should be taken into consideration.
What do the comps tell you?
When determining the sale price, analyzing comps is the most crucial step. Comparable sales are listings which have sold in the past 6 months and are located in the same subdivision or geographic area as the house you’re researching.
By focusing primarily on sold homes, you keep the focus on true market value. Active listings only reflect what a seller thinks their home is worth, not what a buyer is willing to pay for it.
Every home and lot is unique, so you’ll need to lean on your real estate agent to help you select the most like-kind comps and add or subtract value based on differences in condition, updates, size and more.