When purchasing a home, price is usually a major factor. Buyers need to consider today’s value as well as future potential. Inner loop realtor Bill Edge says that a home is worth what a qualified buyer will pay for it. When sellers price their homes too high, they reduce the home’s appeal to potential buyers. Sellers who prepare for market by pricing their homes competitively are more likely to achieve the greatest success when marketing their property.
The following four ways to value a home can help sellers set the right price and help buyers in determining how much to pay. These methods assess today’s values only and don’t predict future market fluctuations.
- 1. Appraisals
While a realistic appraisal can enhance a real estate transaction, a bad appraisal can easily ruin a desired transaction. That is why it makes sense for a buyer’s representative to be proactive with appraisal issues. Agents can talk to appraisers and enlighten them regarding comparable properties that are not listed in the MLS or other public records. Competent appraisers value this kind of factual information. Challenging an appraisal after the fact is much more difficult than discussing things up front before an appraisal is made.
In order to get the appraisal you want, offer accurate relevant facts and highlight alternative properties meriting inclusion in the appraisal.
- 2. Broker Price Opinions (BPOs)
A broker price opinion is an estimate of a property’s likely selling price. These are commonly used by lenders for the purpose of loan modification. BPOs can be a check against the appraised value as well as when dealing with short sales and pre-foreclosures.
Lawyers use BPOs in divorce settlements. Investors make use of BPOs when updating the value of property portfolios. Some government programs directed at reducing the number of foreclosures use BPOs. They are even used in bankruptcy settlements and estate planning.
State restrictions may limit who can conduct BPOs. Agents and brokers who are authorized to conduct BPOs must be certain to comply with the realtor code of ethics promoting the public interest. Those making inaccurate estimates can suffer negative consequences.
3. Comparative Market Analysis (CMA)
You will get off to a good start when you pay a fair price for a home. A CMA can save you thousands on a home purchase. Recent home sales over the last six months in your target neighborhood are relevant. A minimum of 3 comps are necessary but 5 are even better.
Determine a rough estimate of your target home’s value by comparing it to the comparable properties currently on the market in the same location and of similar quality. Characteristics such as area, lot size, number of bedrooms and number of bathrooms should also be taken into account.
The seller’s goal should be to set a price that will attract a qualified buyer in a reasonable period of time. Owners wishing to sell their homes quickly should set an asking price that is very close to market value. It does a seller no good to price a home too high.
- 4. Automated Valuations Models (AVMs)
Lenders use AVMs for property estimates. These are computer models offered by multiple companies that access public records using mathematical software to assess appraisal accuracy. Banks are likely to use this type of software when confirming appraisal values for new mortgages as well as refinancing.
AVMs excel at providing pricing insight but lack accuracy because individual property attributes are not always addressed by computer models. In neighborhoods where there are many foreclosures results can be unreliable.
Looking at AVM numbers can help determine the value of a property when distinctive factors related to the property and its location are taken into account as well and applied to the overall value.
Conclusion
Initial pricing can have a major effect on the outcome of a transaction. Realistic pricing will achieve maximum price in a reasonable time. A seller’s cost or desired profit is irrelevant; the market determines the price. Realtors are not eager to show homes that have been listed for a long time. While improvements may look great, they usually cost more than the value they add to the property. Regardless of which appraisal methods you use, a house that is priced well at the start achieves the highest proceeds.
Remember, we are here to help buyers and sellers. Consider us your real estate source in Texas. Call Inner Loop Houston Realtor Bill Edge at 713-240-2949 to see Houston Homes in 24 hours or less.