The two primary concerns when selling your house are, most likely, how quickly you can close and how much you can get for it. However, as the price of a home is dependant on the specific condition of the property and the real estate market conditions in the locality, it can be difficult to gauge what a fair offer is and whether you should accept it.
That’s why we’ve written this blog – to help you assess whether a seller is making a fair offer or not, or even if you’ve set your expectations too high and are asking for too much. Of course, the final selling price will also be influenced by your negotiating skills, but the two primary ways to determine a fair price for your home are:
As much as possible, compare like for like. Search for similar properties to yours that have sold in the area recently. Try to find houses that have comparable square footage, whose lots are near in size to yours, and are of a similar age and in a similar condition. It’s unlikely you will find properties that are exactly like yours, but you don’t need to.
You’re looking to approximate the price range, not set an exact price. Think of it like this – if you were to simply exchange your house for another (disregarding any legal aspects), would you be unsure who came out better in the exchange? If you are unsure, your properties are comparable.
Additionally, look at the prices of properties that have sold, not those that are selling. There is always a reason a house is still on the market. While the price may not be the determining factor that a home has not sold yet, you can’t tell without doing a thorough investigation, which is simply not practical (if even possible).
So, find comparable houses in your area and look at how much they have sold for. This will give you a reasonable price range for what a fair offer on your house would be. However, there is one caveat – the market can change rapidly, so don’t expect your approximation to be valid if you wait a year or more before putting your house on the market.
Having a professional appraisal done is another good way to determine what a fair price for your home would be. The home appraisal process is a complex one, but it boils down to an independent third party estimating the fair market value of your home based on its characteristics and the market conditions.
Many lenders will require that an appraisal be done before they issue your potential buyer a loan. As the seller, it is not your obligation to have it done but the buyer’s. However, an appraisal can help you determine what a reasonable price for your home would be and, consequently, whether a potential buyer is making you a fair offer.
Whether something is or is not a fair offer is not only determined by the selling price of a home, but also how much you profit from the transaction. And that is where net proceeds come in. Net proceeds is the amount of money you retain after all the expenses of the sale have been paid.
The two most common seller’s expenses are closing costs and realtor commissions. The realtor commission depends on the area and the type of property being sold, but let’s say it’s 5% of the selling price (which is about average in California) for our example.
Imagine this situation - you’re asking price is $500 000. You have one buyer offering $480 000, while another offers $450 000. However, the first buyer is going through the traditional sales process, with you paying the commission and the closing costs (for example, the closing costs are $15 000).
The other buyer is not using an agent and offering to pay the closing costs. While at face value the first offer is better, you need to do the math. %5 of $480 000 is $24 000 and when you add the closing costs and subtract everything from the offer, you end up with $441 000 (before taxes).
Thus, you end up with $441 000 in the first case, even though the price was higher, while in the second instance with $450 000. So, knowing whether someone is making you a fair offer or not does not only depend on how close they are willing to go to your asking price but also who covers the expenses.
There are two common indicators that someone is not an honest actor and that you should be wary. It doesn’t necessarily mean that they are doing it in bad faith, but you should be extra cautious in the negotiations if:
Yes, buying and selling houses includes negotiations. Yet, if you’re asking price is $500 000 (and you’ve set a reasonable price) and they offer half of that, it’s unlikely they will ever make you a fair offer. They are low-balling you and likely trying to pressure you to sell your home for much less than it is worth. You should usually discount these buyers.
The same is true if they are trying to rush you into selling. You should always be able to sell at your own pace – if it’s the day after they make an offer, that’s fine if it’s your choice. You should have ample time to think about the offer, consult with your agent, family, etc. before you accept. If this is not the case, it could be that they are low-balling you.
Finally, you need to decide whether you are willing to remodel and renovate or sell as-is when setting your price. You can get more money if you renovate, but don’t forget that it is both a time- and money-consuming process and you should calculate what the most cost-effective solution for you is.
Regardless of you wish to sell as-is or remodel, contact SleeveUp Homes. We buy houses for cash and will always make you a fair offer. Because we are not realtors or wholesalers, you won’t have to pay any commissions or closing costs and will end up with the most money in your wallet. You can request a cash offer and see that when we say fair, we mean it.