CHAPTER 2 First Steps to Home Selling o Home Selling
Location! Location! Location!" is the most crucial consideration in real estate and a major factor in pricing. Novice and experienced home sellers alike must understand the factors that determine a home's price. Setting the price to sell your home is not a simple formula. Many elements factor into the decision. Throughout this book, you will read examples of similar homes that sold for very different prices and the reasons for these disparities. A calculated home value is not necessarily what you believe your home is worth. Recognizing this helps avoid overpricing, which can leave homes languishing on the market or unsold. Familiarity with real estate terms like market value, appraisal value, and assessed value can save disappointment and frustration, allowing the home seller to set a meaningful listing price. Market value is commonly defined as "the most 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 fetch in its local market, generally an area such as a suburb or neighborhood. Appraisal value is an evaluation of a property's worth at a given date, performed by a professional appraiser. The appraised value is crucial in loan underwriting, determining how much money can be borrowed and under what terms. For example, the Loan to Value (LTV) ratio is based on the appraised value. When LTV exceeds 80%, the lender typically requires the borrower to buy 4
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