There are two important truths about market value.
Market value has very little to do with assessed value. We tested this assertion by sampling 408 home sales covering all of the Madison MLS locations. For each transaction, we compared the 2011 sales price to the 2011 assessed value. Here's a summary of the results:
Sixty-five percent of all homes sold for a price under the assessed property value, with 50% of all homes selling for more than $10,000 under the assessment.
Thirty-five percent of all homes sold for a price over the assessed value, with 20% of all homes selling for more than $10,000 over the assessment.
Overall, only 30% of all homes sold for a price that was within $10,000 (above or below) the assessed value.
When it comes to sales price and assessed values, there is no strong correlation. Some homes sell for a price that that is much higher or much lower than the assessed value. Other homes sell for a price in between.
Market value has everything to do with what buyers view as fair value. Buyers have options in today's market. All things being equal (size, location, style, etc), buyers will choose the home that offers the most quality and most value for their money.
So how do you determine your home's true market value? The answer involves doing your homework and viewing your home through a buyer's eye.
Before you put your home on the market
1. Do your homework. If time is on your side, take advantage of it. Get out and visit your competition. Track which homes sell and which do not, and track the prices for those homes that do sell. You’ll find that some homes sell quickly while others sell only after a series of price reductions.
2. Evaluate your home from a buyer’s perspective. How will a buyer view your home compared to other homes in the neighborhood that are of similar size and style? Focus on the homes that sell. How does your home compare in terms of cosmetic appeal? Does it give the appearance that it is clean and well-maintained?
3. Decide how you will compete with the homes that sell. Buyers will pay more for a home that is clean, well-maintained, and with aesthetic appeal. On the flip side, many buyers will not consider a home that is in need of significant maintenance and cosmetic improvements. (Some buyers will target homes that are in need of significant work, but only at a substantially lower price.) You can increase your home’s marketability by taking some simple steps to make your home look its best. For more on this subject, read Kathleen Quade’s article, Showing Well and Selling Well.
4. Understand that pricing and seasonality go hand-in-hand. If you put your home on the market during the peak buying season (and your goal is to sell quickly), your best bet is to price your home competitively right from the start. Single family home prices tend to be higher during the peak season when buyers are out in full force competing for the homes that are on the market. Take advantage of this opportunity, and avoid the temptation to reach for an unrealistic price. An over-priced home will sit on the market throughout the peak buying season and well into the winter months.
When you put your home on the market
1. Price it right, right away. Your odds for a quick and successful closing will increase when you establish the proper price point at the very beginning of your listing.
2. Continue to monitor the market in your neighborhood. Track the new homes that enter the market. Monitor which homes sell and for what price. Note how your home compares with the homes that are selling. Does your home offer buyers comparable value?
3. Evaluate the level of interest in your home. Is your listing generating much traffic? Do any buyers come back for a second visit? What type of feedback does your home receive from buyers and buyer agents? The answers to these questions can help determine whether or not your pricing (and overall value proposition) are on the mark.
You have resources
If you live in the city of Madison or in Sun Prairie, your municipal assessor web site will provide you with some very good information on the homes that have sold in your neighborhood. One nice feature of these tools is that they include all recent transactions, not just those that sold on the MLS. One drawback is that there is quite often a time lag between when a home sells and when the details of the transaction are posted to the sites. Nonetheless these are great resources that can help you gain a good initial understanding of the market in your neighborhood.
Another good resource for pricing information is your local Realtor. Contact a Realtor you trust, and ask him for his assistance. A service-oriented Realtor will help you understand the market dynamics in your neighborhood, for those properties that sell and those that do not. He’ll provide you with information on selling prices and price changes. He’ll give you a good understanding of the inventory in your neighborhood so you know where you stand with your competition.
Once you put your home up for sale, your Realtor can keep you in touch with the market by providing you with solid, real-time information. You’ll know when new competition enters the market, when a competing listing changes its price or accepts an offer, and when a home in your neighborhood sells (including the selling price).
Your home will sell
Your home will sell when your marketing plan reaches a large pool of buyers and those buyers see that you home is offered at a fair market value. You'll find the right listing price when you do your homework and view your home through a buyer's eye. Feel free to contact us if you should need any pricing assistance. We’ll be happy to help.
This information is provided courtesy of Dan Miller, Shawn Kriewaldt, Chris Venden, Dasha Shy, and Jodi Shehadi of Keller Williams Realty and DaneCountyMarket.com. For more information, please contact:
Don't forget: if you're buying or selling, whether your timeline is 3 months or 3 years, we can help.
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