How Are Home Values And Prices Determined?
Posted on: 12 July 2021
If you are in the market for a home, you, like many buyers, might wonder about the listing prices of certain homes. Once you find out more about how much house you can afford, you might even be curious as to why one home is priced so much higher than another. Homes prices are supposed to be based on their value but that facet of real estate can be difficult to pin down since it's constantly changing. To learn more about values and prices, read on.
Value and Price: How They Relate
Home values can fluctuate because a home's value is not set in stone. For that matter, neither are home prices. Once an offer is accepted, a home price can change but the selling price should remain steady after it's under contract. The value of a home is determined by a professional appraisal but the listing price can be made up of so much more. Take a closer look at both of those factors.
Real Estate Evaluations and Comps
When a seller decides to sell, they contact a real estate agent who tours the home, does some research, and arrives at a suggested selling price. The seller, if they agree, then sets that listing price a bit higher than the suggested price to account for bargaining. The suggested price comes about, mostly, by the agent performing what are known as comps. Short for comparison, comps involve noting a home's features and comparing that home to others recently sold that are very similar in size, area, lot size, rooms, and features. This allows a fair price to be set that is in line with other homes nearby.
Real Estate Appraisals and Listing Prices
Some sellers will pay an appraiser to perform an appraisal on the home before they set a price but it's usually the buyer who has to do that. For the buyer's part, most lenders require an appraisal when approving a mortgage because the amount of the loan has to go along with the value of the home. Happily, most agents are so skilled at what they do that the suggested listing price is higher than the appraised price given any down payment. This matters because you cannot obtain financing on a home for a loan that exceeds the home's value.
If you are looking for homes for sale, speak to a real estate agent about your needs and they can give you advice on making a fair offer on the home of your dreams.
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