What you need to know about pricing your home

Written by Posted On Thursday, 14 September 2017 15:45

 

One of the big online real estate sites was recently sued over their online home evaluations. Those of us in the real estate industry have long known how unreliable these are, but the public has no idea and rely on them as gospel.

So, when the site’s estimate of a woman’s home value was far less than what she thought it was worth, and her potential buyers were all relying on that lower amount, the homeowner took the matter to court.

It’s sad, really, because these sites do the real estate consumer a great disservice.

The only way to know a home’s current market value is by researching what buyers are willing to pay for homes like yours. And, the only way to know that is to look at recently sold homes.

And, the only way to find out the prices of recently sold homes is through the multiple listing service, which these sites cannot access. Only members of the MLS can dig deep into the statistics required to determine market value and those members include real estate agents and appraisers.

Let’s take a closer look at how your listing agent will come up with his or her opinion of the current market value of your home.

The search

Your agent will run a search of sold homes in your area. Typically, agents try to find those closest to your home but may have to move further out geographically if no homes have sold in your area. He or she may print out the listings for these homes. Once the agent has a number of homes to compare against yours, the analysis begins.

 1. Age of the home

The age of homes is important for a number of reasons, so listing agents try to find homes that match, or come within three years, of the build date of your home. Significantly older homes will be worth less than yours. Likewise, newer homes will be worth more.

2. Size of the home

Next, agents compare the size of the homes, both in square feet and the number of bedrooms and bathrooms. Larger homes will be worth more than yours while smaller homes will be worth less.

3. Location

The home’s location within a geographic area is important. Between two identical homes, the one located on a busy street will be worth less than one that isn’t. Typically, homes in the middle of a housing development are worth a bit more than those located at the entrance (because of traffic patterns).

A home near an in-demand school will be valued higher than one that isn’t near the school or is located near a poor-performing school. You get the idea – there is a lot to consider when it comes to location.

4. Condition, amenities and upgrades

This is the trickiest part of the process. Your agent will look at how the condition of your home stacks up to the condition of the comparable homes. Does it lack the amenities the other homes offer? Has your home been updated while the others haven’t? Updates and amenities add value to a home, so a careful consideration of this part of the process can yield huge results for a homeowner.

Professional home appraisers, by the way, will deduct value from your home if other homes have upgrades and yours does not. Likewise, if other homes are in better condition than yours.

Once all of the above has been analyzed, your agent will be able to give you his or her estimation of your home’s current market value and, thus, an asking price for your home.

A note on appraisers

Real estate agents aren’t appraisers, nor are they allowed to call their evaluations appraisals. Only the lender’s appraiser can do that.

Appraisers, however, use much the same process as real estate agents do in arriving at an appraised value.

While it may be tempting to overprice your home, keep in mind that only the appraiser’s evaluation will carry any weight in the end. Even if a buyer offers to meet your inflated price, the sale won’t go through if the appraiser’s value is lower.

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