When you need to sell your home—no matter the reason or timeline—you want to know the market value of your property.
There are a lot of ways to define the value of your home, but the market value defines how much you can hope to get in exchange for your home in the current climate.
Simply put, the market value of your home is largely determined by two factors:
- The aspects of your home, such as number of bedrooms and baths, square footage, lot size, etc.
- The current condition of the housing market.
A quick Internet search will lead you to several free tools for estimating market value. These tools are by no means comprehensive, but they will take some very basic information about your home and the going rate in your neighborhood and give you ballpark sense of your home’s value.
Just remember, those calculators will only give you a very general idea. Here’s a closer look at the factors that go into determining the market value of your home.
How Real Estate Agents Determine the Market Value of Your Home
If your property is listed by a real estate agent, they’ll start by doing what’s called a “comparative market analysis.”
Basically, they look at “comps”—similar homes nearby that have sold in the last 90 days. Ideally, these comps will have a similar square footage, the same number of bedrooms and bathrooms, and a comparable lot size. Once the real estate agent has gathered an adequate number of recent sales data, they average the recent sale prices to get a baseline for the value of your home.
If you want to do some similar research yourself, Zillow is a great source for information about the value of homes in your area.
In addition to these considerations, an agent will often declare a value that’s partially influenced by the psychology of sales. Weirdly, buyers are less responsive to awkward and uneven numbers (i.e. $326,900). And most listings are priced at increments of $25,000. So, even if the average of comp property sales comes out to something like $406,000, you can expect a real estate agent to price it at $400,000.
So that’s the process for determining market value at the time when you list your home. What about when you actually make a sale?
How Appraisers Determine the Market Value of Your Home
It’s great to know the perspective of a real estate agent when it comes to listing your home. An agent’s job, after all, is to help you land on a price that is reasonable in the current market.
That said, in most traditional home sales, you will eventually have to deal with the opinion of an appraiser.
If you’re selling to a financed buyer, there will be an appraisal so their lender can choose to lend (or not lend) the purchase price based on the value of your home. In other words, if an appraiser determines the market value of your home to be less than the selling price, you risk losing the sale.
An appraiser follows the same system for determining market value as the real estate agent does, but with some added attention to the condition of your home. While a messy home won’t affect their perception of the market value, any structural damages will. This means that in order to keep your market value up, you may need to make some repairs.
If you don’t have the time or resources for this, don’t worry. There is another option.
The Difference Between Market Value and Liquidation Value
If you can’t afford home repairs or you don’t have time to wait on lenders to work out financing, there is a faster, less complicated option.
You can sell your home at Liquidation Value, often to a cash buyer.
Liquidation Value essentially refers to the value of a home that you cannot sell in the open market, for whatever reason. Oftentimes, this is the number you work off of when you have to make a short sale, such as when your home is at risk of foreclosure.
Now, the liquidation value of your home will always be less than market value. However, the difference between the two is far less drastic when you sell it to a cash buyer like Mac Properties.
The right cash buyer accepts your home as-is. That means you skip the costly repairs, and you don’t have to pour money into new paint and upkeep for staging.
Plus, when you work with a cash buyer, you don’t have to invest so much in real estate agents. You can cut out commission fees, cut out closing fees, and cut out a whole host of other unexpected expenses that occur during the sales and closing process.
And if you’re in a bind, time-wise, selling your home for cash at slightly lower price is often well worth the peace of mind you get as a result. With a cash buyer, you get your money and move on. You don’t have to spend a month or more holding your breath, hoping your buyer is approved for a loan so you don’t have to start the process all over again.
No matter what you do—financed or cash buyer, market value or liquidation value—one thing is certain:
You deserve a fair price for your home. You’ve invested so much in making your property the castle that it is. Take the time to educate yourself on what your home is worth and what expectations are reasonable in your unique situation.
If there’s anything we can do to help, or if you’re interested in a cash offer, drop us a line. We’re always here for you.