scenarios. It all depends on the direction of the real estate market. If the market is flat and has not changed for a number of months (which is extremely rare), then your house may very well be worth $675,000. But, if the market is trending down, then your house is probably worth less than $675,000 and, if the market is trending up, your house is probably worth more than $675,000. Therefore, when pricing a property, it is extremely important to take into account the direction of the real estate market. However, in order to determine your home’s true market value, it is not enough to know just the direction of the market, it is also necessary to determine the market’s rate of change . For example, assume the market has been steadily appreciating at approximately a 6% annual rate. That would equate to a monthly rate of change of 0.5%. Here is where it gets interesting. To repeat, assume your next- door neighbor’s house closed yesterday for $675,000. However, what is more important to know is when it went pending. In other words, when did your neighbor and their buyer actually come to terms? If your neighbor’s house went pending 60 days earlier, the question now becomes: What comparable sales 60 days ago was the buyer’s offer based on? When appraising a property, comparable sales are allowed to be up to 6 months old. Consequently, your neighbor’s sale price of $675,000 represents what houses were selling for up to 8 months ago and not necessarily what their house is worth today. What this all means is that, if the market is rising at a monthly appreciation rate of 0.5%, then your house is probably worth closer to $700,000 than to $675,000 (8 x 0.5% = 4.0%; $675,000 x 4.0% = $27,000; $675,000 + $27,000 = $702,000). Moreover, this calculation does not include the additional increase in value that results from the compounding of the monthly appreciation.
As a result, if an agent where to list your house for $675,000,
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