Assessing Your Home's Value

photo courtesy of www.goodhousekeeping.com

Whenever I am on a listing appointment the #1 thing that everyone always wants to know is, "How much is my house worth"?  With all of the negative news by the national media this is also a question that can cause anxiety to every homeowner.  Many websites like http://www.zillow.com/ provide estimates or in this case "zestimates" of your home's value.  Zillow takes into account several factors when providing you this data including recent sales and tax values of properties close by.  While it can be fun to look at this it should not be used to price your home for sale.  Zillow does not do a good job at finding comparable homes.  In many places, including Fayetteville, you can have two homes similar in size and close to one another but can be tens or even hundreds of thousands of dollars apart in home value because of updates that may have been made to one house.  Many times you may even have neighborhoods that may seem similar to someone unfamiliar with the market but in reality the houses in one neighborhood can be far more expensive than the next.

When I was in real estate school I learned that you find out how much a house is worth by doing a comparable market analysis (CMA).  When doing a CMA you find 3 similar homes to the house you are trying to find the value of that have sold in the last 6 months and make price adjustments for several things including square footage, age of home, and number of bathrooms.  While a CMA is important in finding a home's value, it is in no way a full indication of how much your house can sell for in today's market.

When I am finding the market value of a home I will first do a CMA but the next step is to look at what is called absorption rate pricing.  Unlike the CMA, which only looks at what has sold in the past, absorption rate pricing takes into account what is currently on the market for sale.  It is in essence the law of supply and demand.  For the sake of this post I am not going to give an explanation of how to perform absorption rate pricing but rather explain to you how you should look at it. 

photo courtesy of www.superstock.co.uk

Let's say your realtor has performed a CMA for you which shows your house to be worth $250,000.  They then should look at how many similarly priced homes have sold in the past year and how many are currently for sale.  I would probably examine the price range of $235,000 to $265,000.  Lets say that in the last year 2 homes sold in this price range and there are 9 homes currently on the market.  This would not be good for you as a homeowner.  If only 2 sold again this year there is a good chance that your home will not sell. On the flip side if 9 homes have sold in the last year and there are only 2 currently on the market then you have a good chance of selling your home and selling it fast.  When absorption rate pricing does not look like its in your favor, you will be forced to lower the price of your home to make it more attractive to buyers.  You should look at what homes are actively on the market and how they compare to your home.  If a home on the market seems superior to yours then you need to be priced below it if you intend to sell.  If you have the nicest home on the market then you may not have to be as aggressive in pricing your home.  Keep in mind that almost everyone always thinks that their home is the nicest and best home available.  Because of this you should listen hard to what your realtor recommends for you.

If you would like a complimentary market analysis of your home which will include absorption rate pricing email me at vancet@townsendrealestate.com