Whether you are buying a home or selling one, there are a lot of terms that seem confusing at first but are important to know. Buying or selling a home is a delicate balance of weighing the value of the target home with the value of similar homes around it based on a variety of factors such as amenities, location, and size. In all of this, it is easy to get confused and taken in by mistaken “common wisdom” that’s really not wise at all. Homes sell for hundreds of thousands or more, so of course you want to be cautious with your investment.
The difference between the asking price and the selling price is simple.
- The asking price is how much the home is listed for.
- The selling price is how much the home actually sells for.
The difference between the two amounts depends on elements such as the real estate market in the target area and other comparative features. Knowing what the asking and selling prices are is only the beginning of buying or selling a home. Let’s go beyond asking and selling price into the details.
The most important thing to know when buying a home is how much leverage you have. This is measured by how much demand there is for houses in the target area, and is called either a “buyer’s market” or a “seller’s market.” In a buyer’s market, there are a lot of homes available and not enough buyers, while in a seller’s market multiple buyers might make offers on the same home. House valuations are conducted differently in the UK because you want your offer to be competitive so it is considered by the seller.
As a seller, this will inform your asking price and help make the selling price as close to it (or higher!) as possible. You can usually figure out which type of market an area is by looking at how long houses are on the market. If it’s not long, that’s a seller’s market, so be prepared to bid against other buyers. If homes take months to sell, be ready to haggle and you could find a great deal.
How to Compare
Knowing the selling price of comparable homes in the target area can help sellers come up with a fair asking price and buyers know how much homes in an area are worth. Comparable homes are ones that have recently sold (the more recent, the better), are close to the target home, are about the same size as the target home, and have similar amenities. A sample of local area home sale prices can tell both buyers and sellers what a fair asking price would be for any home.
How to Determine Asking Price
If you are a seller, the factors you want to weigh also include how attached you are to the home. Many sellers set asking prices that are unrealistically high because their attachment to the home causes them to overvalue amenities. Does the yard have a custom pool? Is there a day room off the master bedroom?
These are great selling points, but not necessarily huge moneymakers. Local property values can give you a starting point to work with, but in a buyer’s market, be ready to accept a little less. For more information on selling a house fast, particularly in the UK, view this great article here.
How to Make an Offer
Buyers need to be even more aware of the market because as the party making the offer, it is up to them to start negotiations. Conventional wisdom says to always offer low, but that advice does not apply to every situation. A low offer in a seller’s market can lead to an offer being turned down or even ignored, and even in a buyer’s market offers should not be so low that they insult the seller. Buyers also need to know local market prices and get comparisons. After all, this is an investment of hundreds of thousands of dollars, as well as the security of everyone who depends on you! Be prepared to negotiate until a compromise is reached on the price, and then you can make a formal offer, locking in your bid on the home.
The difference between the asking price and the ultimate selling price has a lot of effect on real estate. How much a home is sold for influences the prices of the homes around it, and gives an idea of the value of homes in the area. Both buyers and sellers should familiarize themselves with this information so the two can meet in the middle and get the home sold!