How much can you sell your house for?
The “fair market value” of real estate is defined as the amount that the house will sell for if the seller is not under any pressure to sell and the buyer is not under any pressure to buy. Accordingly, if you are selling your house, have already signed a contract to buy another one, and only have a two-month timeframe to sell, you are under pressure to sell and may have to accept a “below fair market value” offer. (See my article – “Should I Buy a New Home Before I Sell My Own”).
If you have not already signed a contract to buy another house and are seeking to sell your house for its full fair market value, it can be determined by an appraiser, who is a professional trained in determining the value of real estate. There are several methods of appraisals that are used to value different types of real estate; the method that is used for appraising “one-family homes” is called the “comparable sales method,” where the appraiser determines the fair market value by comparing the house being appraised to comparable nearby properties that have been recently sold. To oversimplify this concept, a four-bedroom house situated next door to a similar house with three bedrooms that recently sold for $500,000 on one side and a similar house with five bedrooms that recently sold for $600,000 on the other side would be appraised for $550,000.
Appraisers use databases containing sales prices and descriptions of houses, in the same neighborhood, similar to the one being appraised. Using these comparables, they make “adjustments” based upon the difference between the house being appraised and the “comparable” houses recently sold. Examples of adjustments (plus or minus) would be based on location, square footage, age/condition of the property, number of bedrooms, baths or other rooms, whether there is a basement and if it’s partially or completely finished, and whether the house has a garage, porch, deck, patio, swimming pool, etc.
A common mistake many sellers make is asking their neighbors what the value of their house is. Many people inflate that value, usually because they sincerely believe their house is worth more than it really is! If you don’t want to pay for a “formal appraisal”, you can find your own comparable sales by searching an online website if one exists in your county. New York City has the “ACRIS system,” while Westchester and Suffolk counties have similar, searchable websites. (See my article – New York’s On-Line Real Estate Databases). And if you are adventurous enough to visit your county clerk’s office, you can view the recorded deed of any property that was recently sold, and determine the sale price by examining the amount of tax stamps affixed to the deed when it was recorded. Since New York State requires a transfer tax of 0.4 percent of the purchase price, dividing the amount of tax stamps by 0.004 will provide the sales price! For example, if a house sold for $500,000, the required transfer tax would be $2,000 and that amount of tax stamps will be shown on the deed. Dividing the $2,000 of tax stamps on the deed by 0.004 equals $500,000., the sales price of the house.
Finally, most real estate brokers will be happy to provide you with comparable sales data they obtain from a Multiple Listing Service, in the hopes that you will hire them to sell your house.
If you have any questions or comments, please contact me at peter.roach@roachlawfirm.com.
Peter Roach
Peter T. Roach & Associates, P.C.
