Home » Real Estate

How to Determine What a Property Can Really Sell For in Any Market

May 11, 2008
Determining what a property is really worth in today's market can be challenging. Market conditions in some parts of the country seem to have house values slowly decaying every day. In a few pockets of the country house values are actually flat to rising in value but the problem of determining what a house can actually sell for at any given time can still be a challenge.

The traditional method of determining Fair Market Value (FMV) was with appraisals, still favored by lenders as the most "scientific" method of determining property values. The values determined by appraisers are based on comparable sales ("comps") in a given radius of the property. The distance from the subject house was for many years one mile but over the years it has been decreased by the lenders to 1 mile or the same subdivision, whichever is the closer to the house. An appraisal is an educated guess of what the house could sell for in a market that is not adversely affected by outside influences. Few of these markets exist now because of the lending problem and over-supply of housing inventories. Appraisals are required by lenders for financing approval on all properties.

For short sales and pre-foreclosure action, the Lenders use a Broker's Price Opinion ("BPO") which is a FMV estimate by a realtor of what the property can sell for. The realtors get paid half or less than an appraiser and the standard they use is comparable sales. Open listings and Days on the Market ("DOM") are not brought into these estimates unless there are very few comparable sales in a certain radius of the house. The over-looked values that should be included are the For Sale By Owner ("FSBO") properties that can sell at lower prices and still net out the same money because the owners aren't paying a realtor's commission and there is no way to test the motivation level of every property that's for sale. This motivation level is the culprit of declining home prices throughout the country.

A very motivated seller will sacrifice his home to avoid making additional mortgage payments, while on the other end of the spectrum, the un-motivated seller tells every perspective buyer, "I won't take a cent less than $____". Knowing that motivation is so important how is it possible for a seller or a buyer to determine which homeowner is the most motivated?

The best and only realistic way to accurately determine what your property can sell for is to find out what your competition is willing to sell their homes for and offer a perspective buyer a better value instead of trying to beat the competition based solely on price. It sounds simple and in fact it is when you take a systematic approach to finding not only what your competition is willing to accept but also what their house looks like compared to yours. The value of this method can mean your house selling in a few days versus months, and tens of thousands of dollars more in your pocket at closing.

So to get started, you must drive the neighborhood where your house is located and write down the address and telephone number of every house that is for sale by a Realtor, bank owned ("REO"), and especially the FSBOs. Next you will need to call every Realtor or owner and ask to see the house and once you are in the house, ask what they are asking for the property, and finally, what is the best price they are willing to take for a quick cash sale. Discount these prices by another 5% to get a final overview of what your competition actually is. Using these values you should be able to tell what to sell your property for to get out the highest price possible and in the quickest time.

Recently we called on a REO listing with a Realtor with an asking price of $249,000. When pressed about what the bank would accept, we were told $189,000. In the same neighborhood, a pre-foreclosure property in a realtor's hands was offered at $259,000, but again when pressed, the Realtor said the homeowner could take the $186,000 he owed plus the realtor's commission. These two homes will probably sell way below what would be expected by an appraisal, BPO, or any method except driving the neighborhood. Before you buy an investment property, make certain you know what the underlying distress sales are expected to bring that will drastically affect your house's price.
About the Author
Discover How To Make Every Real Estate Deal Profitable with an artificially intelligent piece of software that shows you how to make money Every Time, in Any Market, and it even prints an Irresistible Offer for the seller.
Click Here To Learn More
Rating:
Please Rate:
(Average: Not rated)
Views: 113
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Accounting
    • Credit
    • Currency Trading
    • Debt Consolidation
    • Insurance
    • Investing
    • Leasing
    • Loans
    • Mortgage
    • Mutual Funds
    • Personal Finance
    • Stock Market
    • Structured Settlements
    • Taxes
    • Wealth Building
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources