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Information for Sellers
What is home value?
Home value means different things to different people, depending on how they are involved in a real estate transaction. The home Buyer may have stars in their eyes, seeing "the castle of their dreams" when they look at the property they are purchasing.
Assessed Value
The tax assessor will see a very different picture. The assessor wants to create assessed value equality among the town or city's citizens in order to fairly assess taxes and share the tax burden in an equitable manner amongst all property owners. Towns periodically undertake re-evaluations to update their market assessed value for all properties. While based upon historical sales data, it does not always represent current market data. It is a useful tool in comparing the values of similar real estate properties.
Appraisal Value
Appraisers must protect the interest of the lender and therefore must be more conservative in the appraisal value they place on a real estate property. The appraisal value is more typically based upon historic sales data and may or may not agree with market value.
Market Value
Market value is what a ready, willing, and able home buyer pays to a ready, willing and able seller in a transaction with no undue influences. It is a negotiated value which changes relative to market conditions, supply of homes, demand, and seasonality in some cases. Market value is created by the home buyer and seller. Too often, buyers and sellers have a notion some other factor determines market value, when in reality; those two parties determine market value.
Importance of Pre-Qualification
Almost all homebuyers, especially first-time buyers, want to buy the home of their dreams. They are eager to rush out and see the best that is available. While their excitement and enthusiasm is understandable, it is not always beneficial. Viewing properties that are not within the buyer's correct price range is a waste of everyone's time, and always leads to disappointment.
For example, let's suppose there are only three homes available in home Buyer A's and home Buyer B's correct price range. Only one of those homes has three bedrooms, essential to both homebuyers. Buyer A has not taken the time to get pre-qualified for a mortgage and is out looking at homes that may or may not fit their price range. Buyer B, who is pre-qualified, looks at only those homes within their price range and makes a home offer on the one that has the third bedroom. Their offer is accepted, leaving only the two remaining properties available to Buyer A.
Let's look at an alternate scenario. Home Buyer A again looks at all the most expensive properties and foolishly makes an offer the seller can't refuse. Buyer A applies for a loan and is turned down due to lack of income. Lenders will never allow any buyer to purchase a property that they cannot afford. The seller's time was wasted, the lender's time was wasted, and the buyer's time was wasted.
Affordability is based on many factors, not just income. Credit ratings must be looked at, how much debt a person has must be factored in, and not all mortgage programs have the same rate of interest. That's why pre-qualification is important. Once all factors have been examined, a lender will provide a homebuyer with a monthly payment amount that fits the buyer's means, and that saves time for everyone.
Pre-approval is also very important. It is a preliminary commitment from the lender, that based on your application and the documentation you have provided, you stand a very good chance of getting final approval for your mortgage loan, pending appraisal. If you were a seller and two buyers made an offer on your property, would you choose the buyer who has a letter of pre-approval from a lender attached to their offer, or would you risk selling to the buyer who has not received a letter of pre-approval and is perhaps not even pre-qualified?
Understanding a Home Inspection
Home inspections are highly recommended by Peak Properties for all property purchases, including recently built and new homes. A qualified home inspection company should be contracted by the Buyer to protect the Buyer's best interests. It is most important for Buyers to attend the home inspection to learn first-hand from the home inspector.
Depending upon applicable state regulations the inspection may cover such major items as foundation, roof, structural components, wiring, plumbing, heating, air conditioning, and chimneys. There are specialty inspections for wastewater disposal, well water, hazardous materials, and others.
The purpose of the report is to get an independent third party professional analysis of the integrity, maintenance required, and overall condition of the property. Houses are imperfect, at best, therefore we caution Buyers not to overreact to a home inspection report. At the same time, Buyers need to fully comprehend the financial impact of the report and their ability to work with issues that have been identified.
A common Buyer misconception regarding home inspections is the Seller's requirement to repair all noted items in an inspection report. This is strictly optional by a Seller, and generally considered to be a negotiable item between Buyers and Sellers.