What is my Home Worth?

Some people may think that getting an appraisal will help calculate the value of their home. However, appraisals are meant to calculate risk tolerance to a bank and not market value. Others may use automated valuation tools found on many real estate websites. Although these may be interesting data points, these methods use past sales in order to ascertain current market value. This can often be misleading.

Furthermore, these online tools are blunt instruments compared to the precision of a Comparative Market Analysis. Some people will look at the average price per square foot and apply that to their own home when trying to estimate their home’s value. Although price per square foot is a useful tool for analysis of real estate trends, it is a wildly inaccurate tool when estimating a single property’s value due to variations in a homes construction quality, maintenance, updating, age, style and presentation.

The prefered method for calculation of a property’s market value is to use a comparative sales approach to establish the value range of the property.

WHAT IS A COMPARATIVE SALE?

A comparative sale (commonly referred to as a “Comp”) is most likely not the house next door or across the street from your own that has recently sold. Just as you would not compare a pickup truck to a sedan just because they’re on the same car lot, you do not want to compare a rambler to a split-level or two-story home even if it is on your block. A “Comp” is a recent “Comparable Sale” of similar size, style, condition and age. A Comparative Market Analysis will typically include recent sales, pending/ contingent sales, and possibly active listings. This approach provides a comprehensive survey of the recent sales history, market trends, and the current competition in your immediate area.

It is unlikely that your agent will find a recent sale or active listing that is exactly the same as your own home. Therefore, your agent should make adjustments between your home and the comparable properties/sales to account for differences in size, amenities, and condition; thus establishing the estimated range within which your home should sell.