Determining Fair Market Value
As professional REALTORS® our job is to commend a reasonable listing price range based on our estimates of what the fair market value of your property is. Fair market value is defined as: “A selling price for an item to which a buyer and seller can agree”. We will also keep you up to date on the market conditions throughout the listing period.
To determine Fair Market Value we study the current market conditions as well as recent sales. Observing Active Listings helps us to understand who our competition will be. Pending or Conditionally Sold listings indicate what buyers are purchasing. It is reasonable to assume that they likely looked at some of the other Active Listings but in the end, they choose the one they bought. We look for indicators as why they may have chosen that property over the others. Sold listings are the most important because they show us what price the Buyer & Seller agreed on “Fair Market Value”.
FAQ’s On Price
Who decides what the listing price should be?
Our job is to provide you with accurate market information so that you can make an informed decision.
How do we make sure we don’t under price our house?
Taking the time to analyze our report and weigh that against the current market conditions will ensure you have confidently priced your house. We've heard Sellers comment that they don't want to ‘give away' their house which is understandable but defining what that price would be is key. A Seller may have a number that they want or need their house to sell for but it may not be a price that the current market can bear, so current market value may be a 'give away' price in their minds.
Can we price our house higher than recommended and then lower the price later if we don't get any showings?
That is one strategy that some Sellers use however it is not one that we recommend. Over a two-year period, John Knight analyzed real estate sales in northern California and he came to the following conclusion;
'Houses whose prices are changed sell for less than homes with no price revisions” John Knight, Professor of Real Estate University of the Pacific. The old adage states 'You only get one chance to make a good first impression' and that applies to real estate pricing too. We also find that if a house is priced too high to begin with, the Sellers are often 'chasing' the market after that to stay competitive. An overpriced listing will not generate a market value offer from a Buyer. From experience, we can assure you that when a listing is overpriced the Buyer will start low and the Seller is never negotiating from a strong position.
When will my house sell?
We can tell you how long similar houses have been on the market but it's impossible to predict how long it will take to find a Buyer for your house. It's been our experience that houses priced at market value sell under the average days on the market (DOM). Predictably most houses that sell near or longer than the average days on the market have experienced at least one price reduction and in some cases many.
Where do Buyer’s get their market information from?
We will never show this report to a prospective Buyer, this is highly confidential. However, when we represent a Buyer, we do prepare a similar report of sales and active listings to ensure the Buyer is well informed on what the market is doing. Buyers will likely have looked at many of the competing listings and will have established a market value from viewing the other houses.