Are you planning to sell your home this year?
I bet you want the best price you can get, bit it’s no easy task to set the price for your home, which is probably your most valuable asset.
It is likely you will think your home is worth a mint and the estate agent will promise to get you top dollar if you let him sell it for you.Most buyers in the market will see your property within the first few weeks of it coming up for sale.
They have been in the market for a while and are motivated and keen to buy.
Many are sick of looking and this works in your favour.
In fact 80% of your target market is likely to view your property during the early stages of the marketing campaign.
This means that if you get the price right, a bit of healthy competition amongst some keen buyers could drive up the sale price of your home.
It also means that asking too much and scaring off these potential purchasers could be an expensive mistake.
When deciding what sale price to put on your property, let’s first consider the factors that you should not use to determine the correct market price.
The value of your home is not related to:
- How much you paid for it.
- How much you owe on your home mortgage.
- The renovations you have done to your home. It’s the things that you can’t easily change or enhance that add value to your property - things like north facing windows and sunshine all day or proximity to the beach or the water.
- How much you love your home.
What does determine the market value of your home is what a willing buyer is prepared to pay.
You can put any asking price on it you want, but the eventual sale price will be what a buyer is willing, and able, to pay.
With that in mind here are some of the things that make your home worth more.
1. Location
Everyone has heard that the three most important factors in real estate are
location, location, location.
And as a seller this applies as much to you as it does to buyers. Some areas will always outperform the average and show higher price growth than other localities.
We’ve seen instances of certain suburbs taking on the name of a neighbouring more expensive suburb and property values have increased by up to 20% almost overnight.
During real estate boom times there seem to be buyers out there for every property.
Even properties in poor locations sell quickly.
On the other hand in flat real estate markets, properties in good locations still seem to sell while their lesser counterparts languish on the market.
This is because there are always plenty of potential buyers who want to live in good neighbourhoods.
It’s much harder to sell properties in secondary locations such as on those on main roads, right next door to schools or shopping canters or near industrial premises (remember this next time you buy a property).
Having said that, there are always purchasers for properties in every location.
It just has to do with the right price.
2. Land size
The next most important factor underpinning the market value of your home is
the size of the land it sits on.
Land in good locations is scarce, as they just cannot make any more of it.
The scarcer the land, the more valuable it is and the more it bumps up the overall value of your home.
If you have an apartment in an inner high density suburb it takes on a percentage of the land value for the whole apartment building and this adds to your property’s value.
3. Size
When determining the value of a property, size does matter!
Despite the size of the average Australian family getting smaller, we are building bigger and bigger houses.
The average house is now almost four times the size of the homes we grew up in as children.
But the size of your house has to be appropriate to the area.
If you’re in the outer suburbs where there are many young families, a one or two bedroom apartment probably won’t be desirable and is not likely to be valuable - there just won’t be much demand for it.
Put that same apartment in the inner suburbs, where younger generations want to live, and it will be a highly sought after piece of real estate.
4. Aspect
We have seen identical houses in the same street, one with a north facing backyard and one with a south facing yard.
The north facing house, which has a sunny aspect, will always sell more quickly and often for a considerably higher price.
Much the same happens with water views.
But these are both subjective issues.
Some people will be prepared to pay more for a great aspect, while others will forego the views in order to get a decent size backyard.
5. The condition of your property
The building materials used for your home, together with its liveability and
appeal will add to its value.
Sometimes renovations can enhance a property’s value considerably and sometimes you can spend too much and over capitalize.
As new homes become less affordable, purchasers are willing to overlook the latest designer kitchen or bathroom in favour of an overall package that’s less pricey.
Tips: To get the best price for your house and sell it quickly, you are going to need to get a number of buyers interested enough in your house to want to buy it.
When competing with other buyers the fear of missing out means buyers are more likely to pay the top price.
The trick is to market your house so that it is appealing to a range of purchasers.
What is the “fair market value” of my home?
Every house sells for what we would call fair market value – the price a buyer will pay and a seller will accept given that neither the buyer nor the seller is under pressure to close the deal.
Pressure, or motivation comes from life changes such as divorce, a sudden job transfer, difficulty meeting mortgage repayments or a death in the family and these things compel either the buyer or seller to act quickly.
Note: Fair market value is what you would expect to get for a house if you put it straight back on the market after it was initially sold.
Now when we’re talking fair market value, let’s get one thing clear – it may not always be “fair” to you.
It may not be what you call “equitable” because fair market value is impartial, it takes no sides and it doesn’t care about what you need or want.
Let’s look at it this way – suppose there are two identical homes next door to each other in the same street.
One was purchased by Pat and Ken 15 years ago.
They paid $300,000 for their home and over time have slowly paid off their mortgage.
Their neighbours, James and Katie bought their home five years ago and paid $600,000 for it.
During the last few years we know that property markets have remained fairly flat so they’re property hasn’t gone up all that much in value.
However they have done some improvements to the home and even put a swimming pool in the backyard.
Both couples now decide to put their homes on the market.
Because they are very similar, almost identical houses – the same size, age, condition and location – other than the improvements James and Katie made, you’d expect they’d have similar fair market value.
Under the circumstances, the fact that James and Katie paid a lot more than Pat and Ken doesn’t matter.
Even though they put a swimming pool in, this won’t necessarily increase the value of their home by the $50,000 they paid to have it installed.
In fact some buyers won’t even be interested in looking at their house because they don’t want the extra maintenance that comes with an inground pool.
So the fair market value of their home may be $5,000 to $15,000 more than Pat and Ken’s because of the pool, but in the eyes of many buyers it in fact won’t be worth any extra at all.
When both couples sell their homes, Pat and Ken will walk away with a pocket full of money because they’ve paid off their mortgage, allowing them to go off and buy their next new home.
Whereas in the case of James and Katie, they’ll probably only have a little left over after repaying their mortgage because house values haven’t increased all that much since they bought their home.
So now you can see why we say that despite the term “fair market value”, it’s not always fair or equitable to you – it’s simply unbiased.
In today’s market, your house is worth what the current market deems it to be worth – not what it’s worth to you in ‘your’ opinion.
If you engaged four property valuers to value your home, it is likely they would come back with a range of values, from say $600,000 to $650,000.
Now if you asked four potential buyers to value your home, they may come back with figures of $575,000 to $675,000.
They will offer a range of prices based on their perception of your home’s value, its presentation, how much they liked your house, how much they can afford and how much they want to own it.
So as you can see the fair market value of your home is not a figure, it’s a price range.
