Cost is the amount you actually paid for a property plus any capital improvements you have made since the purchase.
Price is the stated amount a seller is willing to accept for a property.
Value is the amount a buyer is willing to pay - given a certain set of circumstances.
Market value is the amount that will bring a sale between a willing buyer and a willing seller. It is based on the history of similar properties recently sold in the area.
Substitution refers to the actual value of your premises. Value is determined not by the cost invested in a property, but by the value derived from it. This means that value is determined by what a purchaser gets out of a house, not what an owner has in it.
For sale price is an asking price only. These prices have not been obtained in the market place and are, therefore, not a reflection of what the market is willing to pay.
Sellers often erroneously arrive at an asking price for their property based on those they read in the newspaper and which their neighbours are asking, rather than by making a study of comparative sold prices.
Sold prices are the actual selling prices and are your best guide on which to base your pricing decision. Assuming the properties are similar to yours, you should be able to attain a similar price.
How quickly will an overpriced house sell?
Prices in the real estate market rise and fall over time. In a flat or declining market, correct pricing is critical since the market won't absorb an overpriced property within a reasonable time. The result is that the longer an overpriced house is on the market, the less likely it is that the seller will get his asking price.
By the time an overpriced property is finally sellable, it may be over-exposed causing buyers to make lower offers. An overpriced property will often sell at below market value simply because of an initial inflated price.
Likewise, a house that is put on the market at fair market value, will often sell at well above market value - simply because it was priced to sell and drew great interest from buyers.
Over-improvement or over capitalisation
Improvements should be made for enjoyment, not only resale. You cannot add an item to a house, use it, then expect a buyer to pay the original cost.
A seller might need more money - but the value of the house stays the same.
Buying in a high-priced area
Values are specific to location. High values in the area do not necessarily increase the value of your home.
Original purchase price high
If you bought in an up-market and are selling in a down-market, you need to adjust your price accordingly. It is not that you overpaid, but simply that the market has experienced subsequent change.
Lack of factual data
Base your opinion of value on recent documented sold prices.
By building in bargaining room you may cut out buyers. A buyer can only make an offer on a house, once he has seen it. Buyers may offer low, but they will do that at any price. It is easier to negotiate a buyer up to fair market value, than to an inflated price.
For more advice about selling your property contact us at firstname.lastname@example.org or call 083 300 7866 or 083 3093274