In this section, we’ll discuss the importance of understanding value and why it can cost you literally thousands of dollars if you don’t. We’ll also learn what the difference between a comparative market analysis and an appraisal is--and how to have one done for your house free of charge. Other important topics include a discussion on the relationship between price and time, how to know whether or not to lower the price of your house, and offering terms or concessions to buyers.
Understanding the Proper Value of Your House Is Essential
I know a woman who recently listed and sold her house through a friend of her's who was a real estate agent. This individual purchased her house about 10 years ago for $45,000, which, at the time, she believed was a fair price. When the woman initially decided to sell his house, she estimated that it had probably grown in value to $65,000 and maybe $70,000 if she was lucky. She just happened to mention this in a casual conversation to her real estate friend, who in turn told him that her house was worth much more than that. In fact, the agent told him, "List your house with me, and I’ll get $160,000 for it." The woman thought the agent was out if her mind and that she would never be able to sell the house for that much. The agent assured her that the market in her area had appreciated significantly in recent years because of increased housing demand.
The woman agreed to let the agent sell at the recommended price, and, in less than 90 days, the agent did exactly that. She was able to sell the house for full asking price, which, remember, was more than twice what the seller thought it was worth. The seller was a homeowner and not an investor and had therefore not kept up with market prices. The real estate agent, on the other hand, was an active professional who was in tune with the market and who knew precisely which areas were hot and which areas were not. The seller’s lack of knowledge almost cost him $90,000 because she didn’t understand the importance of value as it applied to real estate.
The moral of this story is, “Be sure to do your homework or it could cost you literally thousands of dollars.” In this example, if the woman had sold the house on his own without researching property values, she would no doubt have saved herself the 8 percent sales commission, but it would have cost her tens of thousands of dollars in lost value from under-pricing her house. I think you would agree with me that it is in your best interests to make sure you properly understand property values in your neighborhood. Failure to do so could otherwise cost you thousands of dollars.