Getting ready to list:
The most common question a homeowner asks when first contemplating listing a home for sale may well be, “how much is my home worth?”. But what considerations enter into the preparation of a home valuation?
Look at value from a buyer’s perspective. You have decided to buy a home. Therefore, you begin by selecting the neighborhood you would want to live in. You do this because you are looking for a lifestyle that will make your family happy. So your prime concern is location, location, location. Once you have chosen a neighborhood, you turn your attention to other considerations. For example, you may look for the floor plan that will best serve your family’s needs and provide the amenities you desire. Next you request showings of homes that appear to meet your criteria best.
Additional factors that impact value:
Then other factors come into play. A home’s curb appeal usually offers a first blush as to what to expect. As you enter, what you see contributes to your first impression. If a home is clean and well organized, you conclude that it is well maintained. You also believe that it is in sound physical condition, though inspections are needed to confirm that. If you find that it has a neutral color scheme, you may feel comfortable that your family will enjoy the living environment. Smells may entice or repel you. If a home has an updated, state of the art kitchen, the chef in you may be thrilled. On the other hand, you may want to add certain design features which are absent. All these factors and many others form the mosaic that goes into determining a home’s value.
Can you get a reliable home valuation by using an internet tool?
Instant home valuations cannot take most of these factors into consideration. AVMs (automated valuation models) generate such estimates. They utilize mathematical algorithms to analyze a home’s value. Therefore, they rely on programmed assumptions and consider only superficial data, like what nearby homes of similar square footage have sold for. Relying on this limited information, they compute rough guesses. Slight variations in the assumptions algorithms employ can cause significant differences in computed results.
So how much is your home worth? You would not be wise to rely on a rough guess if you are considering selling:
- Would you accept basing the pricing of your home on less than reliable information?
- Pricing your home too high may cause it to languish on the market unsold. Do you consider that a tolerable risk?
- Are you willing to endure losing thousands by pricing your home too low?
Of course not. Therefore, don’t settle for anything less than a professionally prepared comparative market analysis. Insist on the more reliable information it delivers.
The comparative market analysis advantage:
To price a home competitively you must understand the market. Therefore, a professional must take great care in gathering information and preparing a reliable home valuation for you. A valuation prepared by a realtor is called a comparative market analysis. In preparing it, the Realtor incorporates knowledge of the market, experience valuing properties and research to arrive at a reliable estimate of the value of your home. Best of all, you can expect that it will be prepared free of charge.
The Realtor will usually begin by accumulating information about your home. As you would expect, the more accurate the information gathered, the more reliable the home valuation will be. The evaluator will have to consider your home’s condition, outstanding features, and significant renovations. Then he or she will research how much similar homes in your neighborhood are selling for. Since such prices offer a guide as to the relative value of your property, they materially effect the comparative market analysis. Of course, a remodeled kitchen or master suite is something to be excited about. But the market ultimately determines how such additional renovations will effect your home’s value. It defines “value” as the price an independent buyer will willingly pay and an independent seller will willingly accept.
Details included in a CMA home valuation:
The following factors form the foundation of a CMA analysis:
- What homes comparable to yours are actually selling for and how many are currently listed for sale.
- How long they typically stay on the market before they are sold.
- The relationship between their “listed” and “sold” prices.
- The absorption rate: Given the number of comparable homes listed for sale and how many typically sell in a month, how many months’ supply is currently on the market.
If you are serious about selling, you should insist on a detailed home valuation prepared by a professional. Accept no substitute because a professionally prepared CMA offers the reliable information you need to make a sound pricing decision.
This is the first in a series about questions sellers ask. Do you have questions you want answered now? Please start a conversation below. I monitor discussions frequently and will be glad to provided answers.
Andrew Kruglanski, Broker
Ocala Home Guide Realty, LLC