Understanding terminology, when talking about real estate, can really help because terms are interchangeable, for example Market Price and List Price or Market Value and Sale Price. People’s roles often dedicate the terminology but buyers and sellers just want to buy and sell. Sounds simple, Yes? No? The actual answer is No because buyer and seller perceptions are different, value components (such as location to parents), seller goals, buyer goals, impact to emotions (someone leaving a home that make up 50% of their life) and of course facts around the market (such as a grocery store around the corner). Home worth is established at the closing just as the home closes and title changes, the buyer and seller establish it at that moment and time, minutes(s) later something happens and now the home value may have changed. Think about home worth like a slow-moving stock market; up and down the market goes and hopefully trending upward over time.
List/Market Price (hereafter List Price) incorporates lots of factors, much more than data. Establishing inherent value is problematic because sellers and buyers intrinsically rate values differently. As an agent, I determine market price without viewing the property, or the probability of selling it in 30, 60, 90 days and just start by basing it on comparable properties and market data. Then I determine List Price after viewing and assessing the benefits, property condition, external market data, seller requirements and local conditions.
List Price is designed to inspire Buyer property interest. Priced high, the home lingers and stays out of the buyer’s array of home searches. Priced low, different avenues are created. First, if in decent condition, it can create a bidding war and the home will sell for market value. Second, if major renovations are required, it will generate an interest with flippers and the bids will come in lower. Of course, there is always the in-between but a lower than market tends to sell at market unless the home has problems outside the parameters of the home.
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