It is very clear that banks and agents don’t value homes the same. Their prices always differ or have variances. Have you ever wondered why this discrepancy? How can a house be valued at several prices? How do you determine the right price? These variations exist for a number of reasons.
The value of the bank
If your home is to be mortgaged, then most certainly your lender will have to value it.This satisfies the lender and gives him confidence that your asset provides ample security against the amount of money borrowed. The asset acts as a collateral. Such that if you are unable to repay back the amount borrowed plus the interests the lender which is the bank can sell the property so to recover back its cash. Therefore most of the valuations of the bank are slightly lower conservative as compared to the agents. Some of the times the valuations are approximately 10%-20% less than the selling prices of other comparable and similar homes.
Price Appraisal of the selling agent
Most of the agents in real estate are most of the times asked to assess and determine the market value of the property one wants to sell. In order to fix a price tag on the house or property, an agent first critically analyzes the market and researches on sales which are comparable.
However most of the agents tend to overprice property in order for them to reap benefits on top of their paid commissions. Hence most of the agents’ valuations are slightly higher than the market values. However, it is important to note that, not all agents overprice property.
The sale price
Despite the price valuations available, the price which the successful buyer is willing to pay and the one which the seller is willing to sell on the day of the contract is being sealed is the binding price of the property by law. Therefore despite the bank and agents both valuing the home or property with their own interests at hand, the seller and buyer also have their own interests.
The Valuation of the Local Council
Each year the local councils, water and fire departments determine the amount of money the home owners owe them. So the pricing and valuations of homes is also based on this prices. This is because the deductions have to be included in the sale price. If the amount of charges by these authorities is high, then the prices of homes will be slightly high and vice versa.
The Price of the seller/home owner
Every seller of a property always has a price in mind in which he would like to sell his property or home. However, at the end the seller will adjust his or her price according to the demand of his property or home. Keep in mind that small luxury improvements do not add up the total price of the house. If the house has a best food vacuum sealer, the owner can’t count on a significant price increase for example. If the demand is low, he or she will accept the price of the highest willing buyer, if it very high, he will accept the price of the highest bidder.
Therefore in the valuation of the price of a home, a number of prices may appear. Also there may arise a lot of differences between the price valued by the bank and that valued by the agent.