Q: My wife and I are about to list our home for sale. I understand that a property is really only worth what someone is willing to pay for it. Is there anything we can do to confirm that our listing price reflects the home's value?
A: Value is the price a ready, willing and able purchaser is willing to pay for a home. There are at least two methods that you could use to determine the value of your home to arrive at a listing price.
You could hire a professional to appraise your home. The appraiser might use a cost approach that estimates the replacement cost of a structure, less depreciation, price land values. He could also use an income approach, an estimate of the net income of the property over the life of the structure presented in present day dollars, if the property is producing income.
It is not likely that the appraiser would compare your home to similar homes sold within the last six months, under contract to be sold and currently for sale. The appraiser would make a formal analysis of the features of the house and use a standard method using formal guidelines to arrive at a value.
It is not common for a seller to pay an appraiser simply to arrive at a listing price. Professional appraisers are commonly hired by a lending institution after a contract for sale has been signed to assure that the property they are financing is being sold at a fair market value. Occasionally, a home will "under appraise" and a price adjustment is required before financing by that bank.
A second and more common method to reach a listing price is to ask your real estate agent to do a comparative market analysis or CMA. This is a comparison of your home to similar homes in your immediate neighborhood and nearby that have sold within the last 12 months or are currently on the market. The process is similar to the comparisons done by an appraiser but without formal guidelines and without a fee.
It is not uncommon for a seller to ask more than one real estate agent for a CMA. Each real estate agent is trying to determine the highest price a buyer would be willing to pay for your home. The values suggested by each real estate agent should be fairly close. If one real estate agent arrives at a value that is very different from others, you may want to examine the cause. It may be a lack of information, inexperience or a simple mistake.
The value of your home is not necessarily the same as the listing price. If you are motivated to sell quickly, you may want to list a lower price. If you list your home above a medium price, it will probably be on the market for some time. If it is on the market too long, it might become stale or market worn, and become even more difficult to sell.
You are correct that the value of your home is what someone is willing to pay for it but many factors influence a buyer's decision. Working with your real estate agent to determine a listing price is a good idea.
Attorney Sylvia Heldreth is a Certified Specialist in Real Estate Law. Her office is located at 1215 Miramar St. in Cape Coral.
This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.