Home Equity
Measuring Home Equity; A Homeowners equity in their home is the difference between what the home is worth and what they owe. At any point in time, it’s an estimate because value is subjective until the home actually sells. If the seller thinks the home is worth more than what a buyer is willing to pay, the 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.
Measuring Home Equity
Home Equity becomes more objective after a home sells; the speculation and conjecture is over because actual money and title have been exchanged. Value is established when a home seller and buyer have negotiated the final selling price.
Equity as defined above is more accurately referred to as Gross Equity. After expenses, the mortgage and liens are deducted from the sale price, the proceeds are referred to as Net Equity. You may want to read our recent article on the subject: Home Equity Working for You
When Selling a Home
Like in business, the goal is to maximize revenue and minimize expenses, the same is true when selling a home. The goal is to achieve the highest possible sales price while keeping expenses as low as possible.
Setting the price of a home is ultimately the seller’s decision, and it’s an important one. The price impacts the proceeds the seller receives and how long it will take to sell. Price will also influence how much interest it generates from buyers, and eventually whether it sells at all.
Cost vs Value
The cost of a home is what the seller paid plus improvements and Cost has no relationship to Value. Market value is the most probable price willing and informed buyers and sellers can agree on in a competitive market within a reasonable period of time.
As you begin to work on measuring home equity; if it’s priced too low, the seller leaves money on the table. Price it too high and the number of interested buyers drops and ultimately impacts how much the house sells for. Statistics show that an over-priced home will take longer to sell. And after an extended period on the market, will sell at a lower price than it would have if priced accurately from the beginning.
Market Prep
Preparing a home to go on the market calls for an investment on the home sellers part; you may need to paint, or replace carpet, and spruce up the landscape to attract potential home buyers attention. While these things may not add value to the home, preparing a home for the market is an important element when you’re looking for top dollar.
Decluttering is easy to do but it takes time and may involve temporary off-site storage for excess personal items. When the counter tops, closets and drawers are stuffed, it can make your home less attractive to Buyers.
Selling costs can vary based on the selling price and the terms negotiated in the contract. Your agent will provide an estimate of selling scenario’s so you know in advance what to expect.
Don’t Decide Solely on a High Price
Your real estate professional will review recent sales in your neighborhood along with information to help you decide the best listing price. When measuring for home equity we have a note of caution; don’t be lured by an agent that gives you a high estimate that’s clearly outside market comps. Even in a Sellers Market this can back-fire. While that high number might be exciting to think about; it can actually work against you. Want more info about why this is the case? Send me an email, I’m happy to give you a complete over-view of our pricing strategies that bring top dollar.
The Home Seller Sets Price, The Market Determines Value
As of this writing; in the 9 Desert Cities, (Palm Springs to Indio, CA), homes are selling on average in 32 days and sellers are still seeing multiple offers in some areas and in certain price-points. Overall, homes are selling on average at their listed price, but some areas in the Desert are still selling above their listed price.
Discuss with your real estate professional pricing your home at, or slightly below market value and using a “coming soon” promotion to encourage increased buyer interest and possibly multiple offers.
Looking Back or Looking Forward?
When measuring home equity; positioning your home for the current market will be more important than it has been in the past several months. We’re starting to see a “leveling” in the Desert Real Estate Market. For the first time since February 2021, new listings entering the marketplace outpaced the number of closed sales. Strategic pricing in a transitioning market will help you maximize what you ask and expect to sell your home for. We’re seeing Buyer’s who have become price weary, they’re less willing to buy anything at any price.
Measuring Home Equity, The Price you Ask, and the Agent You Select
Your decision in selecting the right agent should be based their skill-set, reputation in the market they serve, integrity and track record.
We are one of the top teams in the Desert and we’re on standby to help.
Let’s Chat! Drop us a line to schedule your consultation today.
