One of the challenges of determining your home’s value is that “value” is subjective; one buyer may be willing to pay more than another. Buyers determine value by comparison shopping.
They will look at the price of your home based on its features and benefits and compare it with similar homes that have recently sold or are currently on the market. So how do you find that sweet spot, meaning a listing price that will attract buyers and help you reach your goals?
In order to create value in the eyes of the buyer you either need to have a competitive list price or have more features and benefits for the same price! Most homeowners getting ready to sell their home are not looking to add any new features to their property.
Let me be clear, I am talking about adding a new feature, not simply making repairs to bring the property to today's current standard! Every home is going to have a kitchen, bathroom, etc. (at least we hope)!
Here are a few factors that influence the value of a property:
● Square footage of home, property acreage and age
● Location and local market conditions
● Comparable homes that have sold recently
● Economic conditions, including but not limited to interest rate environment
● Renovations and repairs
Realtors have their own techniques for determining a home’s value. The process many realtors use to estimate a home’s value is called a Comparative Market Analysis (CMA). A CMA includes information about comparable homes (also known as “comps”) in your area. The data is typically pulled from the Multiple Listing Service, the Realtors® database of properties in a given area that are listed for sale or have a sale pending.
If done properly, a CMA can tell you what homes similar to yours are selling for, how long it’s taking them to sell, and what homes sold for compared to their original list price.
What to look for in a CMA:
● Number of bedrooms/bathrooms
● Style and view
● Home type (e.g. single-family home, condo, townhome, etc.)
● Recent sales price
When a buyer purchases a home, the bank requires them to get an appraisal at some point before underwriting of the loan can be completed. As the seller, you’re not required to get an appraisal prior to listing the property, however it may be a good idea if you don’t want there to be any second-guessing about your home’s value when you’re ready to list.
It’s the appraiser’s job to provide an impartial, thoroughly researched estimate of a home’s value. They do that by visiting the property and reviewing recently sold or pending sale comps.
Appraisers use Fannie Mae’s Uniform Residential Appraisal Report as a guide for conducting an appraisal.
This report is a checklist of things appraisers should look for, such as:
● Where the home is located
● Whether the home is in a FEMA flood zone
● The condition of the utility services and fixtures on the property
● When the home was built
● The type of foundation
● The condition of the attic and basement, heating and air systems, walls, windows and doors
● Additional amenities, such as a pool, deck or fireplace
● Any structural improvements or repairs that have been made
● Whether any additional repairs or improvements are needed
● The condition of any appliances in the home
● Signs of damage that would compromise the structural soundness of the home.
In addition to using this report as a guideline, an appraiser would consider the sales history of the home and the approximate replacement cost to rebuild the home.
According to Opendoor.com: There are three types of home values you need to be familiar with as a seller:
● Appraised value: According to Investopedia, appraised value is a home’s value as determined by a professional appraiser at a given point in time. Appraised value is used by mortgage lenders during the underwriting process to determine how much a buyer can borrow.
●Assessed value: Assessed values are used to determine how much property tax is owed on a home. Assessed value is set by a municipal or county tax assessor, who evaluates the home’s features and those of comparable properties to arrive at a valuation. It’s usually a lower number than fair market value.
●Fair market value: Fair market value refers to how a home is valued when both the buyer and seller are reasonably knowledgeable about the property and neither is under any pressure to buy or sell.
According to Realtor.com, fair market value tends to be the truest measure of a home’s value overall, since it’s based primarily on supply and demand. This information is presented for informational purposes. As I have said before, please call a local REALTOR for all your real estate needs no matter how big or small. We are trained professionals here to make your life easier. It's best to surround yourself with the right team that can continuously give you the right advice for all your circumstances. <
Lisa DiBiase is a Broker/Owner of Landing Real Estate. She and her company represent buyers and sellers in the Greater Portland area. For all your real estate needs contact Lisa at 207-653-0823 or email@example.com