Your home will sell for a fixed value!
The largest myth and misconception of sellers today is that there is a fixed price for which your home will sell. The first step to busting this myth is truly understanding the idea of fair market value. Fair market value is often misinterpreted as the simple definition of the price a seller is willing to sell for and what a buyer is willing to pay. There are some more important distinctions in this definition that need to be considered that are playing out in today’s real estate markets.
Fair Market Value — Fair market value is determined by the price buyers are willing to pay given their choices, and what sellers are willing to part with their property for, given their choices and market competition.
The important difference is subtle, but is more commonly misunderstood given the current conditions of the real estate market. The largest change over the past 12 months has been the shift to a more buyer-controlled marketplace. Now by traditional definition, we are not completely in a buyer’s market as inventory levels have not exceeded six months in most markets. Six months of supply of homes is traditionally referred to as the neutral point of a balanced market. Anything under six months has traditionally been labeled a seller’s market and anything over six months of inventory has been labeled a buyer’s market. Today’s marketplace has returned much of the negotiating power into the hands of the buyers.
Buyers are being more selective and picky. While buyers face higher interest rates and less competition today than they have in the past several years, they have returned to a position of negotiating power in most cases.
Now there are still properties in high demand that are creating competition due to their desirable location, condition, and often competitive pricing. Sellers have been a little slower to adapt to the market shifts thinking that they can still receive top dollar and in some cases, receive multiple offers. The exuberance of the market and seller control of the last decade has seemed to create a misalignment of market expectations.
The big myth
There is not a fixed price for your home; there is actually a range of value. Today, sellers are frequently attempting to cut corners by not properly preparing their properties to maximize the range of value. With inventory levels increasing in most regional markets, the properties that are being absorbed have some common themes:
1. These are the best locations in neighborhoods.
2. These are properly prepared with all necessary repairs, maintenance, and updating completed prior to going live on the market.
3. These are competitively priced based on active listings — not just priced on comparative historical sales. Buyers are rejecting properties that don’t have the perfect location, condition, and pricing.
In any market, the greatest expense is often the money you don’t make. Many homes that are on the market are falling trap to the Big Myth. The owners believe that still historically low inventory levels are reason enough to fall into the fixed price belief.
Sellers who have been properly counseled and truly understand the marketplace can still find success in today’s market and can reach the higher end of the range of value if they are willing to invest in proper home preparation.
The market always speaks loudly, but the question is will sellers listen? A true trusted adviser can and will help you navigate this market to reach your goals.
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado. He can be reached at email@example.com or 970-430-6463.