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Common Misconceptions About Home Pricing and How to Avoid Making Them

Aug 17, 2007
So, what is my home worth? That's the most common first question that you might have asked yourself when you decided to sell.

You might have even gone across the street (or a block over) and looked at what homes are selling for in your area. This may have given you a good ballpark figure, but should never have the final say on what you base your decision on.

The problem with basing your price figure (for your home) on values you find for homes in and around your area (that are for sale) is that you are putting your trust solely on the fact that the Agents that priced the homes you looked at, know what they are doing.
What you may not have considered is that the Agents who priced those homes may have priced them where they are just so they could appease the homeowner. They may expect to come back to the homeowner 2 or 3 times asking to lower the price and they don't mind waiting. Why should they? It's not their house for sale!

Not All Listing Prices are Equal

The problem with the price-high-maybe-we'll-get-lucky price scheme is that the amount of time to sell the home can be several times longer than a home that was priced right in the first place.

So, is a high price more important to you than selling your home quickly (or even a reasonable amount of time)?

Not All Agent Valuations are Equal

To some extent, just by doing a little research on what homes are selling for in your area puts you ahead of half of the homeowners in any particular market. Many homeowners base their assumptions of their homes value solely on factors that have no real merit. Things like: Tax Assessed Value, "what I heard Sally got for her home down the street", "what Uncle Joe got for his home across town", and many others. None of which really have a solid foundation.

What most Real Estate Agents & Brokers do, which is similar to the process of looking at homes in your area, is that they do a Comparable Market Analysis (some call it a competitive market analysis). What they have access to (that you do not) is the entire database of homes in your area that are for sale and listed in the Multiple Listing Service (MLS).
They have to pay subscription fees (often very high rates) in order to have access to that information. You can bank on the fact that every active and licensed Agent in your home market has direct or indirect access to this database.

With this information they can establish a good range of value for your home. They'll look at homes that are for sale, homes that are pending, homes that have sold, and homes that have not sold.

Understanding the information that they have access to gives you insight into how they might calculate or estimate a fairly good Fair Market Value for your home. What you have to understand though is this, even though they all have access to the same information, not all Agents are created equal when it comes to interpreting that information.

Fair Market Value is the Key to Success

It is absolutely imperative that you price your home at Fair Market Value from the beginning of the listing. This will ensure that you will sell your home for the highest price in the shortest amount of time.
Often 80% of the effectiveness of marketing a home is linked to where you price your home from the start.
Additionally, the first offer you receive on your home is usually your best offer. The amount of time it takes for you to receive that first offer will vary greatly depending on how close your price is to Fair Market Value.

Fair Market Value is not:
What another Agent says a home in your area is worth
What your neighbor says his home is worth
What you think you need to make from the sale of your home
What you want to put in the bank from selling
What you paid for the property last year

Buyers and Sellers Determine Value. . .Together!

The value of your property is determined by what a Buyer is willing to pay and you (the Seller) are willing to sell for in today's market. That's the true Fair Market Value of your home.

The buyers of today have all the information that you have. They will base their offer by comparing your property to other sold properties in your area. They will evaluate your home against the other's comparing the cost verses the value.
About the Author
Dirk Zeller is an Agent, an Investor, and the President & CEO of Real Estate Champions. His company trains more than 250,000 Agents worldwide each year.
For more information on homes in Lake Keowee visit:
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