Understanding the relationship between Equity, Sale Price and the Agent you select is critical to your success when selling your home. A Seller’s equity in their home is the difference between what the home is worth and what they owe. At any point in time, it is an estimation because value is a very subjective term. If you think your home is worth more than a buyer will pay for it, your estimated equity is too high. If a buyer is willing to pay more than the seller believes the home is worth, the estimated equity is too low.
Sale Price Validates Equity
A true determination of equity becomes more objective when the home is sold. The value is solidified by the sales price. That’s because the value is determined by negotiations between the seller and buyer. This eliminates speculation and conjecture because money and title are being exchanged.
Gross vs. Net Equity
The equity being defined above is more accurately referred to as Gross Equity. Take the ordinary and necessary expenses connected with the sale of a property. Deduct those from the sales price. Also deduct any mortgage balance and/or liens you have. The resulting amount is referred to as Net Equity.
Maximizing Sales Price and Net Equity
Like in business, the goal is to maximize revenue and minimize expenses, the same is true in selling a home. The goal is to achieve the highest possible sales price while keeping the expenses as low as possible.
Setting the price of a home is ultimately, the seller’s decision. Sales price is critical because it impacts the amount of proceeds the seller realizes. Moreover, it can affect the length of time it takes to sell. It also impacts how much activity it will generate from buyers, and eventually, whether it sells at all.
The cost of a home is what the seller paid for it and the improvements made. Cost has no relationship to value. Market value is the most probable price willing and informed buyers and sellers can agree upon in a competitive market in a reasonable period.
Price the home too low and the seller has unrealized proceeds. Price it too high and it eliminates interested buyers.
Sale Preparation Costs Important to Maximizing Net Equity
Preparing the home to go on the market has expenses involved. Things like painting the front door or adding landscaping to increase the initial appeal is an investment to attract the buyer’s attention. While it may not add value to the home, it is an important element.
Decluttering the home takes time and may even involve temporarily renting a storage facility for things that may make your home feel smaller or detract from making your home as visually appealing as possible.
There are obviously selling expenses involved in the sale of a home which can vary based on the price of the home, what is customary in your area and negotiations in the sales contract. The right real estate agent can advise you on these so that you don’t pay anything out of the ordinary and can provide you an estimate of what is to be expected.
Real Estate Agent’s Role
Your real estate professional can provide you the information necessary to decide on price. But you might want to price your home differently than what by the market indicates. The market determines the value, and the seller sets the price. But a good agent can help you know when to set the initial price higher or lower to get the best return. Select an agent based on trust, reputation, integrity, and the ability to execute a successful marketing plan.
In today’s market, on average, homes, are selling in 17 days and sellers are seeing an average of five offers. It is not uncommon for homes to sell for more than the list price. This assumes these homes are not priced dramatically over the market initially.
Call us at (510)-244-0081 or email us at [email protected] to discuss professional pricing strategy. For example, sometimes “coming soon” promotion to encourage increased buyer interest and possibly, encourage multiple offers.