Thursday, July 12, 2012

Fair Market Value Determines Asking Price

Extensive research is the key to finding the home of your dreams. If you become a self-educated real estate expert, you can purchase your new home with confidence. Dottie Herman dispenses real estate knowledge on her radio show, “Eye on Real Estate with Dottie Herman.” As the CEO and president of Prudential Douglas Elliman, Dottie draws on her vast experience in the real estate business.

In a recent show, she discussed the three factors that comprise the worth of a home; cost, price and value. While the words may seem to have the same definition, they have remarkably different nuances. These nuances are relevant in deciding if the asking price is actually the true value of a home. They are also used in determining a reasonable price to offer for the home.

A crucial decision is choosing the right real estate broker to fit your personality and goals. Research the broker listings and interview several brokers. Choose a broker that has an intimate knowledge of the market and understands your needs and desires; a broker that will then be able to find the perfect home for you.

After selecting your broker and having researched the features your home must have, decide on the price range that fits your budget. It is now time for you and your broker to find your new home.

Value

This is Herman’s definition of value; “It’s an opinion of what you think the home is worth, based on how you are going to use it.” Value to each individual buyer is determined by the buyer's particular needs. For instance, a buyer with no children would place less value on an excellent school system, although that does increase property value.

Cost

In setting the sale price of the house, the sellers consider their cost; the purchase price plus the cost of all improvements. This has absolutely nothing to do with setting a realistic asking price. As Herman says, “Cost is [just] a measure of the past.”

Price

Herman states that, “Price is what the home should be worth today. But sometimes people don’t price it right, so what you really want to look at is the fair market value.” Fair market value is determined by all the factors present in today's market.

Fair Market Value
The most significant factor in determining fair market value is a professional appraisal. Determining fair market value is done by researching the selling price of a comparable property, looking at the other sales in the area, and making sure these sales are in the past six months. The length of time the property was on the market is also relevant. Also, has there been a drastic change in market conditions since the sales? A severe economic recession or the closing of a large local employer can have a bearing on fair market value.

There are several other factors that affect the fair market value that are not taken into account in the formal appraisal; the wear and tear on each home, the differences in the attractiveness of the yards and landscaping and the condition of nearby homes. One poorly maintained home and yard can lower the value of nearby property. A reputable realtor will be aware of all these factors. As Herman says, “there is no exact science to pricing.”

A beautiful scenic view and terrific location round out the many factors to consider.

When you have selected the properties that best suit your needs, obtain all the pertinent information, from your realtor regarding the homes and the surrounding area. Visit the properties used to appraise the property you are considering buying. Use this information to make the final selection of your dream house. Your broker will guide you every step of the way; from title check to closing and beyond.


Information Provided by Donna Antonucci
Prudential Castle Point Realty
201-240-6832

donna@donnaantonucci.com
www.hobokenrealestatemonitor.com