The Hidden Cost of Selling Real Estate

Ok, so you are looking around your neighborhood for homes that have recently sold, to get a good idea on what your home might be worth. You find out the Mr. Jones sold his for $600,000, and you are pretty happy because his home is almost like yours. The next day, you call an agent and ask them to do an analysis on your home, figuring they will come up with the same conclusions you did.

As the agent starts to point things out, you notice that Mr. Jones house is valued $10,000 less on the agents sheet. You ask why, because after all, it is the same house as yours. You are surprised to learn that the agent knows something you don’t know, and something that only those with MLS access would know. Mr. Jones gave a seller’s incentive to the buyer in the amount of $10,000, thus that $600,000 you thought he got, was really only $590,000.

I had a home owner contact me the other day with a similar scenario. He was surprised to learn about the incentive, and was equally disappointed. He wanted to know if that $10,000 would affect the value of his home and I had to give him the honest answer and say “yes”.

See, agents can come out and value your home, but they are not appraisers. The appraisers are the ones you have to watch out for when it comes time to sell your home to a buyer. They will research recent home sales in your area and compare them to your home, looking for any discounts or incentives that were given with the home as well. All of it goes into the big pot called the appraisal and that appraisal goes to the final approving authority, the buyer’s lender.

Incentives are great for buyers and help sell homes. But they can also hurt future sales by devaluing neighboring homes. Now this devaluation might not be large, but it is a factor. As I was writing this post, I came across an article from the Real Estate Journal, similar to this topic. It is a good read and can give further insight on how incentives can distort a home’s true value.

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