How to determine the real market value of your home
Category RealADVICE
If you want to avoid a long, drawn-out and possibly costly home sale process, you need to get your asking price right, first time. The fact is that if your price is too high, your property will linger on the market and become "shop-soiled" - and that if it is too low, you will sell quickly, but probably lose money.
But how do you determine the "magic number" - otherwise known as the market value - that will have potential buyers beating a path to your door?
"Market value, stated very simply, is what a financially able buyer is willing to pay at the time your property is listed for sale," says Gerhard Kotzé, MD of the RealNet estate agency group, "and you should obviously try to set your asking price as close to this value as possible.
"However, it can vary greatly, even from month to month, depending on the condition of the surrounding homes and the location, safety and current popularity of the area, as well as the number of bedrooms and bathrooms and the overall size, age and appearance of your home.
"Other factors that come into play are the overall supply of similar properties for sale in the same area and the current demand for those properties, as well as low interest rates (which tend to increase demand) or high unemployment (which tends to decrease demand).
"And most owners do not keep constant track of these factors or the effect they might have on the value of their home, so it is essential for them to consult with a real estate professional before setting an asking price."
First, though, you need to completely disregard some inaccurate ways of determining the market value of your home, he says. These are:
*Municipal value. This is the value that the local authority places on your land and improvements for the purposes of calculating your property rates and service charges. It is worked out according to a mathematical formula approximately every four years, and has nothing to do with current supply and demand or the changing value of your home in the eyes of prospective buyers.
*Neighborhood gossip. You might be told that someone else in your area sold their home for a certain amount, and imagine that you should get more or less the same. But is that figure accurate? And was the home actually sold, or just advertised at a certain price? The average difference between initial listing or advertised price and the actual sale price after buyer and seller negotiation is still around 10%.
*Cost of renovations. Prospective buyers will view your home as a finished product, and how it compares to other homes that look similar and offer similar accommodation. They just don't care how much you paid your builder for an extra bathroom or how much the new tiles in the kitchen cost, or whether you had to pay more for your pool than your neighbour did. These home improvements might make your home look more appealing to prospective buyers, and may thus result in a faster sale, but you cannot calculate market value by just adding what you spent on renovations to the original cost of your home.
In addition, says Kotzé, you should never choose to work with an agent just because they give you a higher estimated sale price or suggested asking price than other agents. That can just be a tactic to secure your mandate.
"Rather consider the professionalism and expertise of any agent you consult, whether you have a good rapport with them, whether they are associated with a reputable and well-resourced company such as RealNet and most of all, how they calculate their suggested asking price for your home. This should be based on a thorough knowledge of current market trends in your area, buyer demand and a detailed comparative market analysis (CMA)."
Compiling a CMA* involves comparing the seller's property with similar properties in the same area that have been recently sold, and the most reliable CMAs are those which use the actual selling prices recorded in the Deeds Office when properties are transferred, he notes. "This gives sellers insight as to what buyers in their area have recently been prepared to pay for a home like theirs, which is a close approximation to current market value.
"And our qualified, experienced RealNet agents all over the country are then able to help you set a 'winning' asking price by putting this data together with the very latest market intelligence, such as any change in interest rates, the current willingness of banks to lend to home buyers, new developments in your area that might increase supply (and put downard pressure on prices), and any significant changes in local employment or unemployment, which can affect affordability and thus the demand for property.
"They are also able to pre-qualify prospective buyers to ensure that they will be able to afford your home, which means that with us, you really can look forward to your home being sold in the shortest possible time at the best possible price."
*For a free CMA and market valuation, you should contact your nearest RealNet branch today.
Author: RealNet
