Good job! You have done wonderful work beautifying your home (or building or land) to make it attractive to prospective buyers. Now, you need to decide what sales price to select in order to maximize your profit while still attracting buyers. How do you decide upon that “magic” number?
There are several ways to set the sales price, with some being better than others. The first is a “do-it-yourself” method. Perhaps you have detailed knowledge of real estate values in your neighborhood. Or, the house that just sold down the street is nearly identical to yours, so you set the price at or near the price for which they their property. Unless you are quite knowledgeable, this approach has obvious weaknesses.
A second method is to use your realtor’s suggested price. This should incorporate a tool that the realtor can run called a CMA (Competitive Market Analysis), which lets you see what similar properties in the area have sold for and the prices of some that are currently on the market.
The third and best, albeit slightly more expensive, way is to have a licensed appraiser put a value on the property. The appraisal will typically cost you between $250 and $500 (much more for commercial properties), but gives you a detailed view of values in the area and advantages or disadvantages that your property has relative to others. After all, potential buyers will compare your property with similar properties in the area, so those other houses and owners become your competition.
Of course, the price at which you or your realtor list the property is rarely the final sales price. You should decide upfront with your spouse and realtor the lowest price that you will accept when prospects start bidding on your property.
Once a buyer is found and a price agreed upon, that is nearly the end (from a pricing perspective) if the buyer is getting a bank loan or paying all cash. Yes, there will still be discussions about the sharing of closing costs, but the dollars amounts are small relative to the sales price.
If you are selling the property using owner financing and creating a mortgage note (also called a real estate note), you will need to consider a number of other points. These include agreeing upon a down payment, terms of the mortgage note, checking payer credit, etc. These points will be discussed at length in a future article.
Alan Noblitt is the owner of Seascape Capital Inc., which buys real estate notes. He may be reached at (858) 672-4678 or toll-free at 1-800-634-4697. If you would like to learn more about real estate notes and read informational articles, visit www.seascapecapital.com.
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CREATING A MORTGAGE NOTE – SETTING THE PRICE