Appraisals & Market Value

Understanding How Your Home’s Worth Is Determined and What You Need to Know About Selling

Are there standard ways to determine how much a home is worth?

Yes. The two most common and reliable methods are a comparative market analysis (CMA) and a professional appraisal.

• A real estate agent can provide a CMA—an informal estimate based on recent sales of similar properties in your neighborhood. Reviewing comparable sales from the past year, along with the asking prices of current listings, helps prevent overpricing or undervaluing your home.
• A certified appraiser conducts a detailed inspection, assessing features like the number of rooms, improvements, size, construction quality, and neighborhood condition. They then compare recent sales of similar homes to determine your home’s estimated value.
• You can also research recent sales records through public records, private firms, or online real estate websites to get a sense of your home’s potential worth.

How do you determine how much a home is worth?

Ultimately, a home is worth what a buyer is willing to pay for it. Market conditions greatly affect this: during a hot seller’s market, limited inventory and high demand can push sale prices above asking prices. The “fair market value” is established when the buyer and seller reach an agreement on price—a “meeting of the minds.”

What about appraised value and market value?

• Appraised value is the estimated worth of a home given by a certified appraiser based on objective factors including comparable sales and property condition.
• Market value is the price the home actually sells for when buyer and seller agree.

What is the difference between list price and sale price?

• The list price is the advertised asking price. It’s an estimate of what you hope to receive.
• The sale price is the actual amount the home sells for at closing. Comparing sale prices of similar homes helps set a realistic list price.

Disclosure

Are agents responsible for disclosing material facts?

Yes, especially if they know or should reasonably know about defects. For example, if water leaks require pans, the agent must investigate and disclose potential roof issues. However, if a seller hides a problem the agent doesn’t know about, the agent is generally not liable.

Do I have to disclose information about my home?

Yes. Most states require sellers to complete disclosure forms listing material facts—information about the home’s condition or legal status. Even where no written form is required, sellers must disclose known problems.

What kinds of things are considered material facts?

Examples include:

• Damage from wood-boring insects
• Mold or mildew
• Roof or foundation leaks
• Sewer or septic system issues
• Age of roofing materials
• Buried oil tanks
• Legal claims on the property
• Encroachments or overlapping structures

Personal reasons for moving or events like a death in the home generally do not need to be disclosed, though some states vary.

Financing

How does the seller determine what interest rate to provide?

In seller financing, rates are negotiable and typically influenced by current mortgage rates, Treasury bills, and CDs. Sellers often charge higher rates than conventional lenders but avoid fees and points. Loan terms usually range from 5 to 15 years.

What are the benefits of seller financing?

Seller financing can speed up sales, attract more buyers, and offer tax benefits to sellers. Buyers benefit from less stringent qualifications and fewer loan fees. Sellers should conduct thorough credit checks and may require hazard insurance and due-on-sale clauses.

What is a bridge loan?

A bridge loan is short-term financing that helps buyers close on a new home before selling their old one. It’s usually secured by the existing property and repaid upon sale. Interest rates and fees are often high, so other options like borrowing from a 401(k) might be preferable.

Foreclosures

Can a home be sold for less than its mortgage?

Yes. A “short sale” occurs when a lender agrees to accept less than what is owed. This process is complex and requires lender approval, sometimes involving mortgage insurers or secondary market entities like Fannie Mae or Freddie Mac.

How long do bankruptcies and foreclosures stay on a credit report?

Typically 7 to 10 years. Lenders may consider circumstances and recent credit behavior when evaluating applicants.

If faced with foreclosure, what are my options?

Contact your lender immediately to discuss repayment plans, temporary payment reductions, refinancing, or loan modifications. Mortgage insurers may provide temporary assistance. Selling the property or a deed-in-lieu of foreclosure may be alternatives.

What types of foreclosures are there?

• Judicial foreclosure: Court-supervised sale due to unpaid debt.
• Non-judicial foreclosure: Sale outside court based on a power of sale clause in the mortgage.

Getting Started

Are there tips for selling a vacant home?

Yes. Empty homes highlight flaws, so repair, clean, and stage the property with some furniture to improve appeal. Maintain the yard and keep the electricity on for showings.

Do I need an attorney to sell a home?

Not always, but having one can help, especially if you’re selling on your own or dealing with complicated issues.

How can I get a quick sale in a slow market?

Pricing is key. Offering incentives to buyers or agents, paying for inspections or warranties, and getting FHA or VA loan approvals can attract buyers.

Should I sell first or buy first?

Both options have pros and cons. Selling first avoids carrying two mortgages but may force quick buying decisions. Buying first gives more time to find the right home but risks holding two mortgages. Consult your agent to decide.

What are the costs associated with buying and selling?

• Buying costs: moving, loan fees, down payment, inspections, title, insurance.
• Selling costs: agent commissions, advertising, attorney fees, title insurance, excise taxes, prorated property taxes, and repairs.

What else should I know?

Keep your home show-ready, be flexible with showings, avoid being present during tours, and manage pets and odors carefully.

How should I prepare my home for sale?

Start with a market analysis or appraisal. Fix issues and boost curb appeal with clean landscaping and minor repairs. Don’t overspend, especially in a strong market.

When is the best time to sell?

When you’re ready or need to, considering personal circumstances and market conditions. Seller’s markets and favorable seasons increase chances for a good price.

Lease Options & Selling Strategies

Everything You Need to Know About Lease Options, Negotiations, Taxes, and Working with Real Estate Agents

Lease Options

How does a lease option work?

A lease option is an agreement where a landlord gives a renter an exclusive option to purchase the property within a set period—often six months to a couple of years. The purchase price is usually set at the start, though sometimes it can be adjusted.

Part of the rent payments may count toward the future down payment. Many lenders accept this if the rent exceeds market value and there’s a valid lease-purchase agreement.

Before entering a lease option, research thoroughly—talk to real estate agents, read materials, and have an attorney review the contract before signing.

What is a lease option?

It’s a lease agreement paired with an option for the tenant to buy. The option binds the seller but leaves the buyer the choice to purchase or not.

Lease options suit buyers who want to own but lack enough down payment or who are working on improving credit. For sellers, it can help move property in slow markets by generating above-market rent, maintaining tax deductions, and attracting tenants likely to care for the property.

Negotiating

Any advice on negotiating?

Be patient, know your home’s worth, stay positive, and avoid letting emotions (anger, pride, greed) get in the way. Treat your home as “the house” rather than “my home” once you decide to sell.

Consider reasonable offers seriously, and counteroffer when appropriate. Don’t let a few hundred dollars spoil a good deal.

Can the seller include contingencies in a contract?

Yes. For example, you can make your sale contingent on buying a replacement home to avoid double moves. However, this may inconvenience buyers who are also in a tight timeline. This works better in strong markets or if your home is unique and priced well.

Do I have to consider contingencies made by the buyer?

Yes, you can accept, reject, or counter them. Common contingencies protect the buyer on financing and inspections. These are standard and reasonable. Be cautious about contingencies requiring expensive repairs unless the issue is serious (like a leaking roof).

How do I respond to a low-ball offer?

Tell your agent the offer is too low to counter but that you’re open to negotiate on a more reasonable offer. Ask if the buyer was shown comparable sales and if they were qualified. Don’t settle for less if you have realistic expectations.

Tax Matters

Are home selling costs deductible?

Yes. Selling costs—such as broker commissions, title insurance, legal fees, and inspections—can reduce your taxable gain on the home.

Are seller-paid points deductible?

Buyers can deduct points paid by the seller, but sellers cannot deduct points they pay on behalf of the buyer.

Can I deduct a loss on the sale of my home?

No. Losses on personal-use property like a home are nondeductible.

Can I deduct improvements made to my home?

Yes, but only after selling, as improvements add to your home’s basis. The basis is purchase price plus improvements minus depreciation.

How do capital gains work when you sell your home?

You may exclude up to $250,000 ($500,000 for married couples) of gain if you owned and lived in the home two of the past five years. Special rules apply for military families and unforeseen circumstances.

If you don’t qualify for the exclusion, you must report gain on your tax return using Schedule D (Form 1040).

What about repairs made to get the home ready for sale?

Repairs like painting or landscaping done within 90 days before sale can count as selling costs to reduce taxable gain.

What if I have more than one home?

You can only exclude gain on your main residence, usually the home you live in most.

Working with a Real Estate Agent

Do I really need an agent?

Most sellers hire agents to handle contracts, disclosures, and marketing, and to access the Multiple Listing Service (MLS). FSBOs (For Sale By Owner) exist but often end up hiring agents eventually.

How do I find the right agent?

Choose a local agent familiar with your neighborhood and property type. Look for someone who cooperates widely through the MLS and has a reputation for competence and ethics. Ask for referrals from trusted contacts.

Is the commission negotiable?

Yes. Commissions vary from about 4% to 8% and depend on services offered. Agents may charge more if your home is overpriced due to extra marketing effort.

What if I want to terminate the listing contract?

Legal termination requires proving the agent failed in due diligence, like not listing your home in the MLS or failing to market it properly. Price adjustments may help if your home is not selling.

What is the most common listing contract type?

The exclusive right to sell gives the agent sole rights to sell and earn commission even if you sell on your own. The agent can share the listing with other brokers through the MLS.

What questions should I ask a potential agent?

• What is my home worth? (Ask for a written comparative market analysis)
• What is your marketing plan? (Advertising, MLS, internet)
• How long is the listing agreement?
• How many listings do you currently have?
• Can you provide references from recent sellers?