Calculating the Value of a Home is Critical to Negotiations
Calculating the value of a home is critical to successful negotiations. Determining value of the home will help you set a reasonable price during negotiations.
By: Joe Hayden Real Estate Team
Dec. 12, 2012 - PRLog -- Louisville, Kentucky -- The Joe Hayden Real Estate Team has released a new article that details calculating the value of a home. Making an accurate calculation of value is a critical step for home buyers when negotiating for a home.
Oftentimes, home buyers and home sellers confuse value with price, and therefore lose sight of benchmarks that help to protect their best interests. Generally speaking, value is a calculation of the condition, location, desirability, functionality, design, style and any updates or negative issues affecting the subject home. Price is what a ready, willing and able buyer will pay for the home.
Take a moment to read our article on price versus value to gain insight into the difference between the two terms.
Before you can establish a negotiating strategy, you must make a reasonable determination of value. From a home buyer's perspective, an accurate calculation of value will give you a basis from which to work for negotiations.
For example, let's say that you perform your due diligence and determine that the value of a home that interests you is in a range from $175,000 to $178,000. This particular home is listed at $185,500 and your comfortable budget is $172,000.
In this case, it is arguable that the seller is over-priced with their asking price as it is a little out of range of the value. The buyer's desired price is a little lower than the calculated value and therefore may be tough to reach in negotiations.
Since the buyer has made a reasonable determination of value prior to negotiating for the home, they now can structure negotiations to get the price into the range of value. They may also be successful at getting the home at a number that is reasonable for their budget.
If the buyer had failed to calculated value accurately, or even at all, then structuring negotiations becomes much more challenging. In our example, if the buyer calculated the value incorrectly at $171,000, then they may commence negotiations at a price so low that it offends the sellers and damages the negotiating process.
If the buyer calculated the value incorrectly at $182,000, then they run the risk of overpaying for the home. Many times, buyers who make this type of error do not discover the problem until they go to sell.
Calculating value accurately will allow you to set pricing standards for the home, and that will help prevent a significant error or mistake that could cost you dearly.
Visit our website to learn more about how to calculate the value of a home. This will give you the tools you need determine value, set a reasonable price and then negotiate from a position of strength.