Chic vs. Geek: Understanding Fair Market Value

We like to remind our friends and clients that value and price are not the same thing, especially in hot housing markets like the Bay Area.

CHIC (PEARL)

Recently, we put in an offer on a duplex in Mountain View. We knew going in that multiple buyers were bidding, and our offer had to be competitive. We also thought we had a good idea of how high the bidding would go based on recently sold homes in the same neighborhood and the condition of the house. So we submitted an offer at 5% above the listing price. In the end, there were 12 bids, and the winner offered 12% above listing – in cash. If we had it to do over again, we’d stick with the same bid, because it reflected the value we placed on the home. But this is a great example of how Bay Area home sales prices are significantly outpacing the average market value. Without a crystal ball, it can be hard to know where bidding wars will lead.

GEEK (KEVIN)

Bottom line: There is no precise formula or magic 8-ball for determining the fair market value of a property. It will fluctuate depending on a range of factors including: the current real estate market; available financing and mortgage rates; and local, national, and global economies. Pearl and I provide the comparative market analysis for our buyers and sellers to use as a starting point for pricing a home. We also take into account the seller’s personal situation, timing, unique home features, and local market trends in an effort to get to a competitive bid. It’s not an exact science, but it’s better than going in blind. Please reach out to us with any questions. We’ll help you make a sound and informed decision, and we’ll always give you our honest take.