Log InJoin 

Determine The Market Value Of Your Home

Determine The Market Value Of Your Home

The market value of your home can be determined by using a Comparative Market Analysis or CMA which is a tool often used by real estate agents. A CMA is not the same thing as an appraisal which is used to ensure a home is fairly priced for lending purposes but instead a determination of the highest price a property is likely to receive in a competitive market under all conditions requisite to a fair sale. For the price to be "requisite to a fair sale" both the buyer and seller are equally motivated and well informed about the property in question. The residence must also be sold in a reasonable time frame relative to other homes on the market.

The Comparative Market Analysis approach to determining a home's value relies on buyers and sellers which are equally informed and motivated. It also requires a home to be sold within a certain time frame. This is the primary method for estimating the value of a residence. This type of pricing also assumes a cash value for the home instead of sales resulting form special financing or other considerations which are placed as a prerequisite to the sale. This pricing approach is aimed at eliminating any subjective analysis such as location which will carry different importance among buyers. It is also meant to mitigate the influence of a homeowners connection to the property due to memories or other subjective emotional connections.

There are many factors which are involved when determining the value of a property. The price should be based on traditional economic forces like supply and demand? Is the home located in a high growth area with developing infrastructure which could lead to increased future value? Is the home located in a restricted gated community with a Homeowners Association which can affect property values? Is the property currently being used in accordance with its optimal value? All these questions are part of the comparative market analysis which arrives at an objective analysis when properly determining the value of a home.

So far this discussion implies the property is in perfect condition and proper working order but it must also consider whether or not there's any depreciation. While most real estate historically appreciates at an average of 5% per year if the residence is in a current state of disrepair or located in an economically depressed area this would need to be considered when determining the correct market value. Finding other properties with similar deterioration issues will provide insights into how much the value of the property may need to be revised downward.

In order to use a comparative approach to determine the market value of your home you will need to find other properties comparable to yours in a similar geographic area. A minimum of three to five similar residences is a good starting point for establishing market value. You will need to gather information on comparable properties regarding final sale price, closing date, length of time on the market and the type of financing used to complete the sale. These are important considerations because it is possible a nearly identical house similar to yours had a cash sale which received a 10% discount and sold within a week as a result. Obviously this could skew the data for the comparison which could result in pricing your home below market value. Of course you only want to select houses for the comparison which closely resemble your home regarding physical characteristics such as the number of rooms, square footage, age of the home and its location.

Your ability to accurately use comparative market analysis will hinge directly on the amount of available properties currently on the market. If there is a large variance in square footage or other amenities they would need to be taken into account as well. If a similar residence was on a corner lot it might have had a lot premium added to the final sale price. Keep in mind that determining the market value of a home using a comparative market analysis is only one part of the pricing picture. It provides an accurate fair market value based off an objective analysis in relation to comparable homes but it is not the only consideration. A qualified realtor will provide additional insights such as the quality of landscaping, the addition of a pool in the backyard or any upgrades to flooring or cabinetry which could affect its fair market value. The CMA provides an initial baseline number which can then be adjusted up or down based on other factors. Do your research and crosscheck your data with a qualified professional to make sure the correct market value for your home leads to a quick and trouble free sale.

Image by: Photo Dean