FMV 7 Factors of Fair Market Value Range

FMV — 7 Factors of Fair Market Value Range

1. Location
2. Size, Amenities
3. Condition
4. Market Supply
5. Market Demand
6. Ask Price
7. Marketing

Location. Location. Location

The old adage rings true when it comes to real estate. The largest contributor to the value of your homes is dependant on “WHERE THE DIRT IS”. A small, modest home in a high-value neighbourhood is likely worth more than a large overdeveloped home in a low-value neighbourhood. A home on a ravine, is worth more than the same home across the street with no ravine (and no views).

Size and Amenities

Generally speaking, if 2 homes sit next door to each other, of the same fit and finish but different square footage, the larger home will be worth a bit more in total, but perhaps a bit less on a price per square foot. (remember they are still the same size and number of kitchens).

Condition

Too many sellers choose to put their heads in the sand on this one. Let's again consider the side by side homes of the Jones, and the Smiths. The Jones, keep their home in really good condition, leaks get fixed quickly, scuffs on the wall get touched up and they don’t allow their kids to rollerblade on the hardwood. The opposite is true of the Smiths. Which house is worth more? The Jones, and no matter what the seller tries to say about it the buyer is not buying their mess of furniture and knick-knacks. The Smiths are likely going to get less money for their home. Now is this 100% true, NO. There is always an exception to the rule, and there is always an example that has realtors shaking their heads in disbelief. However, in general, consider this to be true, and watch out for an upcoming article that talks about how this can be used to your advantage over other competitive listings, and also use a buyers' emotions against them.

Market Supply and Demand

Real Estate values are a direct result of SUPPLY AND DEMAND. If there are more listings available and fewer people buying them, the price goes down. If there are more buyers and fewer sellers the price goes up. We can't do a whole lot about the macrocosm of market supply and demand, however, we can look at how certain things we CAN work with are affected by it, and also how MOST PEOPLE GET THIS BACKWARDS.

When do most people list? In the SPRING. Why? Because that’s when people are buying, so that’s when they will get the most money, right? WRONG. Everyone is listing at that time, so you're just riding the wave. BUT, buyers tend to start really looking in the spring about a month before sellers start coming on. If you can BEAT THE SELLER RUSH you're going to be in a good spot as far as supply and demand.

Let’s look at the reverse situation as well. December and Christmas. Sellers withdraw their listings in droves in December as the buyers are gone and they don’t want to show around Christmas. BUT consider this, only serious buyers are looking in December, so you stand a better chance of productive showings. They also have much less to choose from. Remember the SUPPLY part of supply and demand. You may just want to go out and do your Christmas shopping when really motivated buyers are wanting to view your home.

If your home really, really, really has to be seen in Summer because it HONESTLY, is that much better THAN ALL THE REST, at that time, list before the seller rush in the spring. But in general, in a HOT SELLER's market, you can overprice with less risk than in a HOT BUYERS, or balanced market, Talk to your realtor to find out where your market currently is. OHHHHH and by the way, remember, just because your city is in a HOT OR NOT, market, doesn’t mean your home sits in that same market. Markets are micro more than macro. i.e a downtown apartment condo might be in a highly saturated market with tonnes of new-build competition with heavy incentives to boot. While the single-family market under $500k is what is driving that HOT market you keep hearing about in the news.

Ask Price

Your ask price will also be a direct and indirect determiner of your sale price. Remember our last conversation about the counterintuitive nature of the real estate and the 2 functions of price? Filtering results for buyers and acting like a magnet to attract offers, or perhaps even elicit multiple offers?

The ask/list price is not the same as or equivalent to market value or sale price, it is a tool to attract and elicit offers. THINKING OF THEM AS ONE IN THE SAME IS A COMMON AND CRITICAL MISTAKE. ONE THAT WILL COST YOU MONEY. PEOPLE THINKING THAT INCREASING THE LIST OR ASK PRICE WILL INCREASE THE SALE PRICE OR MARKET VALUE ARE MAKING GRAVE MISTAKES.

Marketing

Marketing is the next big determiner of price. You see good quality marketing works in conjunction with high quantity mass targeted marketing to increase views, increase interaction, and increase appeal and interest to view potential homes in person.

Bad marketing at a discounted price, will cost you so much more in lost potential. But paying more (or typical) doesn’t equate to getting better marketing either. The base of good marketing is great photography, but the base of great photography is a properly prepared home, and that takes time, effort AND A 3rd PARTY THAT WILL LOOK AT YOUR HOME IN A PROFESSIONAL AND UNBIASED MANNER. This should happen months before your anticipated launch date, yet most sellers don’t even consider bringing in a real estate professional until THEY think they are ready to launch.

I have found, time and time again, the more you think your home is ready to hit the market the less likely it is, and the more you think you need to do, the less likely you need to do much. It's human nature that well-prepared people feel ill-prepared and vice versa. (AND by the way, this goes for buyers as well, particularly when it comes to financing).

Coming up next!

We’ll talk more about how you can actually increase the fair market value of your home by increasing both its real and perceived value in future articles, but in the next article, I’m going to delve right into a dirty and deceptive, age-old trick that many realtors use to get you to sign on the dotted line. Don’t be fooled by this trick that will have you DROOLING off the bat and CRYING down the road.