When you decide to enter the market by selling your real estate property, there are still a number of things that you need to consider in order to get the best possible outcome from your whole real estate experience, and to avoid any costly mistakes on your part. You wouldn’t want to give your real estate property an inflated value wherein it would deter people from actually purchasing your home, and you only end up dropping your price to less than what it should sell for. This is why it is very important to learn how to determine the value of your real estate property.
The first thing that you must do with any real estate transaction is to accurately determine the value of your property since it is important for your property to appraise for its full sale price. You should obtain a registered valuation for your property which sometimes can take some time. The cost of this may vary depending on the location and value of your property but it is important to get this value accurate.
Although you may want to price your property yourself, it is not advisable since you may determine your price based on how much you need. Keep in mind that how much you need is not supposed to determine the value of your home, but rather, it is the market data that will determine the value of your home. So make sure that you price your home only according to how much it is really valued in the market, and not base your determination on your own personal preference.
In order to get a professional estimate of value for your home to help you price your real estate property, you should try to obtain, or get your agent to acquire a competitive market analysis, or CMA. These agents, especially those experienced once, can provide you with an accurate price by accessing the multiple listing service computers, which gives them the necessary data that you may need to price your property properly.
Also try to avoid pricing your property high in order to get a much reasonable offer since this may only backfire on you, and this technique rarely works. Just make sure that you set a reasonable price, one that you believe is equivalent to the worth of your property, and stick with it.
Getting the right value for your property helps you price your property in a way that helps you achieve your overall objective. Only a Registered Valuer can give you a insured valuation.
So how does a valuation become calculated and what is market value that they give you.
Market value is generally defined as the price a willing buyer would pay a willing seller for a property in its present condition with neither buyer nor seller under pressure to act (such as career relocation, death of a family member, divorce, etc.). A market value sale also is known as an arm’s length transaction.
A number of factors may affect a residential property’s market value, including:
External characteristics – “curb appeal”, home condition, lot size, popularity of an architectural style of property, water/sewage systems, sidewalk, paved road, etc.
Internal characteristics – size and number of rooms, construction quality, appliance condition, demonstrated “pride of ownership”, heating type, energy efficiency, etc.
Supply and demand – the number of homes for sale versus the number of buyers; how quickly the homes in your area sell, and
Location – desirability for a particular school district, neighborhood, etc.
The most common type of way agents and valuers value your property is with the sales comparison approach.
THE SALES COMPARISON APPROACH
The most common way to determine the market value of a residential property is to use the sales comparison approach. This is the primary method used by professional appraisers to determine the market value of residential properties.
To determine an estimate of a property’s market value, arm’s length comparable sales are used. By examining recent sales of at least three properties in a general (or similar) neighborhood that are comparable in building style, size and construction, one can begin to get a good understanding of a residential property’s market value. However, it is important to consider the circumstances of such sales – perhaps the seller was desperate to “unload” the home, or the buyer paid much more than the asking price because there were other interested parties. Market value and sales price are not always the same.
Comparable sales should include characteristics similar to a given property, such as lot sizes, square footage, home style, age, and location of the home. A new three-bedroom Cape Cod house may not be comparable with an older three bedroom split-level ranch, even if they are on the same street.
Since it may prove difficult to find an exact comparable sale, allowances must be made. To arrive at an estimated market value, dollar adjustments are made for differences between the property being valued (also known as the subject property) and the comparable properties that have sold.
|Hypothetical Comparable Sales Analysis
(Values are strictly estimates and should not be used in your analysis)
|No. of Bedrooms
|No. of Baths
|2 ( – $____)
|No. of Garage Spaces
inferior location (+$____)
|Avenue C similar neighborhood
|Adjusted Sale Price
For example, assume that a residential property is a 1,500 square feet ranch with 3-bedrooms, 1 bathroom, full basement, and two-car garage on ½ acre of land. It was built six years ago in a nice neighborhood. Three recent arms-length sales are identified that appear to be comparable with the subject property. However, Sale #1 is in a less desirable (or inferior) location and Sale #3 has an additional bath. Sale #2 is almost identical to the subject property.
To estimate the market value of the subject property, one needs to determine how the differences between the subject property and each comparable sale property relates to prices at which they sold.In this case: Sale #1 is in a less desirable location, which lowered the
sale price; and Sale #3 has an extra bath, which increased the sale price.
A grid, such as the one above, is helpful to arrive at the market value of residential properties. Because the subject property is not in an inferior location, Sale #1 should be adjusted to reflect what it would have sold for in the subject property’s neighborhood. Sale #3 with an extra bath needs to be adjusted to the sales price of a property with only one bath. Because Sale #2 is almost identical to the subject property, no adjustments are necessary.
By adding and deducting these adjustments to the comparable sale, an adjusted sale price is arrived at for each sale.
A common mistake is to average the unadjusted sales prices to arrive at the market value of the subject property. This can yield widely varying results. Only the sales that are most similar to the subject property, and that have been appropriately adjusted, should be given the most weight.
There are more factors that do come into the picture and a good knowledge of the current market is important. Be careful with value. It is a very sensitive process to work with when you come to the market.