Sometimes people ask me how I go about determining a fair market value when I sell a house in Kansas City. The majority of buyers borrow money to buy a house so that means I have to keep my asking price in line to attract buyers, but also to establish a fair market value for lenders. I also want to make sure my asking price is attractive of course and I’ve found that meeting both these goals and my own goals can be a challenge. Pricing my house is not necessarily easy.
While everybody understands that most buyers have to qualify for a loan, the truth is that the house actually has to qualify as well, which is somewhat surprising to many sellers. It’s funny how we all seem to forget the mortgage qualification process once we own a home. These days more than ever, the fair market value of a house as calculated by a lender may not be exactly the same as the negotiated price between the buyer and seller. Each lender uses a different formula to determine fair market value in certain areas, and those formulas may or may not make sense to the buyer, the seller or the agents involved in the sale. Because real estate prices are fluctuating so much around the country, lenders are especially cautious about qualifying borrowers to meet new federal and state lending regulations. Establishing the fair market value of a house is as important as the credit rating of the borrowers these days because every mortgage company has been forced to repossess houses and sell them at a loss. Whenever I sell a house in Kansas City I get ready ahead of time to satisfy a lender’s need to establish a fair market by selecting a workable selling price up front.
So as far as buyer, sellers and lenders go, any definition of fair market value is subject to personal opinion, but the term also has a legal, practical definition. On Wikipedia.com it reads, “…an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.” In other words, a fair market value would be fairly obvious in a perfect world.
But we are not living in a perfect world and so a fair market value may not be obvious at all. Because each buyer chooses a lender whose estimate of fair market value may be less than the price a buyer is willing to pay, determination of fair market value is not always simple and easy. Naturally, lenders are motivated by self-preservation, while buyers usually want to purchase the most house they can afford. There you have the basic dilemma, and the simple explanation of why it is not always easy to set a fair market value in a real estate transaction.
Whenever I sell a house in Kansas City I make a point to conduct my market research before determining my asking price, and that is how I know the actual houses and selling prices that lenders will be using when they determine the fair market value of my house as well. I have to remember to research houses that have already sold and closed recently along with houses on the multiple listing service. Using this system I have few problems while I’m waiting for my buyer to get a loan when I sell a house in Kansas City.