Establishing Real Estate Prices
Next to “How’s the market?”, I think the question I’m asked most frequently is, “What’s it worth?” Considering that real estate often represents a persons largest asset, that’s a very fair question for both buyers and sellers of property.
Market value is generally defined as the probable price a property will sell for in a reasonable time when fully exposed to the market and with a willing buyer and seller and with neither party under duress. Quite a mouthful, huh? Since most of us don’t carry a crystal ball, you might wonder then how we assess market value.
Well, I have to say that while most REALTORS® are quite able, I know a few too many agents who shoot from the hip or take a listing at any price. I also know of too many buyers who have unknowingly overpaid for properties. Considering that less than 40% of properties are selling right now, pricing is pretty darn important and likely, the single biggest factor in getting it sold.
But back to the question. The short answer is that we compare a property to other similar properties that have sold in the recent past to establish buyer behaviours. We start by looking for homes that have valid comparability in regard to things like usage, location, age and size. For example, a house on the water has a different value than a house in town. A new home can’t be compared to a century home and, I wouldn’t compare a 1,000 square foot semi-detached home to a 3,000 sq ft chalet. Once we select the range of suitable comparative properties, we then compare the houses that sold to the one being appraised so we can adjust for differences in things like size, condition and features such as garages, number of bathrooms and so on. Surprisingly, in most cases, the adjusted values will come in to a fairly tight range of value and that becomes the best indicator of market value.
When you list your home for sale, don’t just chose someone to represent you based on them giving you the highest price because you may end up being one of the 60% of properties that don’t sell. Ask for a complete market evaluation. Get more than one opinion. Consider using a REALTOR® who is a designated MVA (Market Value Appraiser – Residential). Yup, that was a shameless plug as I’m one of only three or four MVA’s in the area. And for more tips, you may want to check my website for additional information on pricing. O.K., that’s the end of today’s lesson. Or rant. You pick.
Have a GREAT week-end!