By Lisa DiBiase
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:
● Size
● Location
● 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
lisa@landinghomesmaine.com
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