Home sellers and home buyers often have far different ideas of the value of a home. Sellers are almost always asking too much for a home, and buyers typically have a good idea of the home’s actual value. How do you bridge the gap between buyers and sellers to get the home you want at a reasonable price?
Seller’s Syndrome: High Asking Prices.
It’s human nature for sellers to want to get the highest possible price for their homes. They may look at the housing market and decide that because their home is in better shape than some of the comparables, or the outside has been painted more recently, or has some otherwise relatively intangible benefit, it’s worth asking for more money. Some real estate agents also tell sellers to ask high prices in order to leave room for negotiation. In reality, high prices can just put off buyers.
Buyers have a better idea of realistic values.
Buyers are typically better-educated than sellers, because they’re looking at multiple homes in various neighborhoods and have a good sense for comparable properties. Sellers don’t have to be overly educated; they typically rely on their real estate agent to convey value and other important property information. Buyers, on the other hand, do a lot of homework, and know what they’re willing to pay for comparable properties.
Meeting in the middle: where buyers and sellers agree.
In theory, the price where buyers and sellers agree is the fair market value. Fair market value is what the buyer is willing to pay, so it’s a fairly arbitrary number and only depends on the buyer and seller. In reality, the fair market value is typically a bit higher than buyers want to pay, and somewhat lower than sellers want to sell. Be prepared to educate sellers, including providing information on comparable properties and your financial resources, in order to get the deal you want. You might have to compromise and meet in the middle.