Equity, Price and the Agent You Select

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A Seller’s equity in their home is the difference between what the home is worth and what they owe. At any point in time, it is an estimation because value is a very subjective term. If the seller thinks the home is worth more than an actual buyer will pay for it, the estimated equity is too high. If a buyer is willing to pay more than the seller believes the home is worth, the estimated equity is too low.

A true determination of equity becomes more objective when the home is sold, and the value is solidified by the sales price. This value is determined by negotiations between a seller and buyer and eliminate speculation and conjecture because money and title are being exchanged.

The equity being defined above is more accurately referred to as Gross Equity. After the ordinary and necessary expenses connected with the sale of a property are deducted from the sales price, along with any mortgage balance and/or liens, the proceeds are referred to as Net Equity.

Like in business, the goal is to maximize revenue and minimize expenses, the same is true in selling a home. The goal is to achieve the highest possible sales price while keeping the expenses as low as possible.

Setting the price of a home is ultimately, the seller’s decision. It is critical because not only will it impact the amount of proceeds the seller realizes, but it can also affect the length of time it takes to sell, how much activity it will generate from buyers, and eventually, whether it sells at all.

The cost of a home is what the seller paid for it and the improvements made. Cost has no relationship to value. Market value is the most probable price willing and informed buyers and sellers can agree upon in a competitive market in a reasonable period.

Price the home too low and the seller has unrealized proceeds. Price it too high and it eliminates interested buyers.

Preparing the home to go on the market has expenses involved. Things like painting the front door or adding landscaping to increase the initial appeal is an investment to attract the buyer’s attention. While it may not add value to the home, it is an important element.

Decluttering the home takes time and may even involve temporarily renting a storage facility for things that may make your home feel smaller or detract from making your home as visually appealing as possible.

There are obviously selling expenses involved in the sale of a home which can vary based on the price of the home, what is customary in your area and negotiations in the sales contract. Your agent can advise you on these so that you don’t pay anything out of the ordinary and can provide you an estimate of what is to be expected.

Your real estate professional can provide you the information necessary to decide on price. However, do not confuse your decision on whom to market your home by the price indicated by the market and reported by the agent.

The market determines the value, and the seller sets the price. Your decision in selecting an agent should be based on trust, reputation, integrity, and the ability to execute a successful marketing plan.

In today’s market, on average, homes, are selling in 17 days and sellers are seeing an average of five offers. It is not uncommon for homes to sell for more than the list price, assuming they are not priced dramatically over the market initially.

Discuss with your real estate professional pricing your home slightly below market value and using a “coming soon” promotion to encourage increased buyer interest and possibly, encourage multiple offers.

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