What is my home worth? Techniques for determining value.
When selling your residential home there are several factors to consider in determining value. In the final analysis, each home is worth what a qualified buyer is willing to pay for it at any given time. However, there are some valuable techniques that can be used to generate interest in your home and net top-dollar on your sale. Here is how to competitively market your home or property regardless of economic conditions.
1. Research Past, Pending, Current, & Expired Sales
This is the most common and least costly method of determining values. The challenge here is finding a comparable property which includes close proximity, square footage, lot size, number of beds/baths, amenities, and age or condition of the property. A CMA, (competitive market analysis) can be extremely helpful in getting your sale off to a competitive start and prevent an unreasonable amount of time on the market.
The least commonly used method of determining value by a homeowner is appraisal. Appraisals are an exhaustive method of determining value requiring a licensed individual following the strict guidelines of appraisal standards. Appraisals can be a costly item for homeowners who need a range of value rather than a specific number. Appraisals are most commonly used by lenders to reach lending maximum amounts for each property.
3. Square Foot Basis
Many times a property, area, or neighborhood value can be established on a square foot basis. This method can be a bit risky as square footage can be misleading. Some homes have unfinished square footage thus greatly affecting accurate values. Square foot values are generally best used on newer construction homes within the same neighborhood.
4. Replacement or Duplication Cost
Another commonly used method for value is replacement or duplication cost. This involves determining a value on the lot or land being sold or purchased combined with the cost to duplicate all structures. Replacement values bring to light the current economic factors of inflation, labor, permitting, & infrastructure costs.
Regardless of the method or combinations of methods used to determine value always consider the elements of value:
- Demand: Know your current market condition. Are you in a buyer or seller market?
- Utility: Utility speaks to the usefulness of any property. Zoning, CC&R’s, & location play an important role in a property’s usefulness.
- Supply: How unique is your home and price compared to what is currently being offered in your market?
- Transferability: Is your property outside the current parameters of zoning, building codes, or have title encumbrances? These items are best addressed at the beginning of your sale rather than during a transaction. Can your home be easily transferred to another owner? These items can greatly affect property values.
With many recent foreclosed, short sale, abandoned, & bank owned properties on the market it is critical that any comparisons used for determining value be true comparisons. Fair sales for real estate must meet all the elements of an “arm’s length transaction” and not be hindered by personal relationships, special financing, or distressed buyers and sellers. For a free CMA on your home or property contact Michael today at (208) 661-1869