Cliff Lewis

Setting the right price is an important first step in the process of selling a home. Is it necessary to spend $200 to $400 for a professional appraisal of your property before placing your home on the market?

A professional appraiser's opinion of a property's market value is based on the recent sales of similar homes in the neighborhood, and on the square footage and condition of the property. Different appraisers might come up with different figures. Even if all of them agreed on a value, there is no guarantee that you would receive that amount for your property.

An alternative to a professional appraisal is to ask a professional real estate agent for a written market analysis of your property. This analysis will include information about recent home sales in your neighborhood, as well as how those homes compare to yours. Real estate agents may provide this service with no charge or obligation. If you are still unsure of the value of your home, you may wish to pay for an appraisal.

What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined?

The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.

By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.

Recently, I have had a number of my core investors start pulling back from buying investment properties. The reasons all ranged from poor housing market, prices will get cheaper and my favorite being no banks are lending money!

It is very easy in this market to "give up" or even agree with any or all of these reasons.. Trust me, for a couple of months.. I did!

Finally after sitting down, and just stopping everything I was doing and forcing myself to think.. here is what I came up with..

Learn the numbers.. I created a very easy spreadsheet that shows my investors the rate of return.. When they find out they are getting 9, 10 or even as high as a 15% on their money, there fears quickly fade away. If you have questions about how to look at "the numbers" for a property, please let me know and I can show you in minutes!

The prices will get cheaper claim, is a little harder.. Everything the "media" writes keeps making claims about another year of falling prices... So when the question of "Why should I buy now, when I get wait a year and get it 7% cheaper." I turn the question back to them and ask them what they are going to do with their money instead. NO investor is going to let 50,000 plus sit in a bank account and just collect 2% interest. And the stock market is below 8k!! So they can not put it there. So the question is where are you going to put your money? Even if prices do fall 7%, your property will still be cash flow positive, you will have made 9% of your down money back in your pocket and paid 1 year off of the mortgage. Investment Properties are totally seperate entities and needed to be treated as such.

And finally "no banks are lending money" is the scam of the century. While banks have pulled back to risky first time home owners, seasoned investors have nothing to fear. I have 2 local banks in my community that still only require 15% down and still can close in 30 days and are both on my speed dial. There rates are low, my line of credit is down to 3.50!! That is just INSANE!!