I’m sure you’ve heard that we’re currently experiencing what’s called a seller’s market. For some time now, the seller, in almost all real estate deals has had the upper hand. Homes are most commonly selling in under a week and receiving multiple full list-price offers. Buyer’s agents are taking extreme measures like waiving home inspections and offering over list price to have their contracts accepted.
An environment like this presents a seller with an interesting question: How high can I price my house? It may seem like a question with an easy answer. Many Realtors have been purposely recommending that owners list their homes much higher than market value because there is such a shortage of houses to buy that they know there is a good chance someone will be willing to pay anything. This may sound savvy, but there are a couple of problems with this reasoning.
First of all, obviously, it’s logic like this that has caused such an inflated market to begin with. Many experts are predicting an inevitable pop of the bubble the housing market has created for itself recently. If this does happen, it could actually cause a dip in home values and your home could be worth less that what you paid for it. No one wants that.
That problem, however, is further in the future. A more immediate worry deals with the appraisal. Every time a loan is obtained an appraisal will be ordered by the bank. On a residential resale property, an appraisal is conducted by comparing similar properties that have been sold in the same area recently. Usually the buyer’s loan will have some sort of contingency on the appraisal either meeting the loan amount, or meeting the sale price. Basically, this means, that if your home is priced above other homes that have sold recently, your buyer’s financing could fall through, nullifying the deal, and causing you to have to start at the beginning in your search for a buyer. In the past, some appraisers have factored in the quickly rising housing market by adding a percentage of worth to a property just because it was sold months, rather than days ago. This gave sellers a sort of backup for the inflation of their properties. Many lenders, however, have recently put a stop to this practice. CENTURY 21 Arizona Foothills has received correspondence from at least one mortgage company that they will no longer accept appraisals based on comparable properties adjusted for time. They maintain that it was not an ethical practice in the first place.
With all of this information, it’s obvious that the smart thing to do, as a seller, is to find comparable properties to support your list price. If you make sure that your property will appraise for what you want to sell it for, you’ll save yourself a lot of extra time and energy in the long run.