listing price. Therefore, it’s critical for home sellers to consider what determines their home’s listing price. There is both an art and a science to setting the listing price. It is not a formula, nor simply mathematical. There are many factors that go into the decision, for example, location (even location on the same street), condition, features, and unique amenities. A calculated home value isn’t necessarily what you believe your home is worth. Recognizing this helps avoid overpricing, a major factor that leaves homes languishing on the market or unsold. MARKET VALUE, APPRAISAL VALUE, AND ASSESSED VALUE The price at which to list a home is the seller’s decision, although a savvy seller will solicit professional advice or work with a trusted real estate agent to arrive at that decision. Knowing the real estate concepts of “market value,” “appraisal value,” and “assessed value” allows the home seller to more meaningfully engage with a real estate agent when coming to a determination of a home’s listing price. “Market value” is the probable price a property should bring in a competitive, open market under conditions requisite to a fair sale. Essentially, this is a pre-negotiation opinion of what a house should bring in its local market, i.e., its geographical area, generally an area such as a suburb or neighborhood. In other words, in what range do similarly-situated houses in the area/ neighborhood sell for? “Appraised value” is an evaluation of a property’s worth at a given point in time that’s performed by a professional appraiser. Appraised value is an important factor in loan underwriting and determines how much money could be borrowed and under what terms. The Loan to Value (LTV) ratio is based on the appraised value. Where LTV is greater than 80%, the lender generally will require the borrower to buy mortgage insurance.
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