Selling Your Home - Know the Territory

Originally Posted on 1/2/2019

Know the territory and the terminology

Location, Location, Location!

We have all heard it, what are the three most important things to consider when it comes to real estate? The answer seems to always be the same: "Location, location, location". While the location is definitely the most important factor when it comes to the value of your home, and one that you cannot change (unless of course, you have a mobile home), there are other factors as well.

So though mathematically based valuations such as Zillow's Zestimate and our own home valuation tool can be a good guide, they can never be 100% accurate and should never be considered an expression of the value of your home. Too many elements factor into the determination of the value of a home. 

It is important to note that the value we are looking at when deciding the listing price of a home is the Market Value of the home, not the Appraised Value or the Assessed Value. Knowing the difference between these terms can save home sellers a lot of frustration.

Market Value

A common definition of Market Value is "the most probable price a property should bring in a competitive, open market in a fair sale". So it is an opinion of what a home should bring in, in the location (market) where it is located in a fair and open sale.

Appraised Value

This is an evaluation performed by a professional Appraiser. Appraised values are mostly used for loan underwriting and determine how much money a lender will lend against a property. For example, the loan to value is always based on the appraised value.

Assessed Value

Assessed values are used by local and state governments to determine the amount of property tax to levy on a property. A property's assessed value is usually not an expression of the property's Market Value or Appraised Value.

Online Home Valuation vs. Comparable Market Analysis

As mentioned before an online home valuation, can be a good tool to give you an indication of whereabouts the value of your home might be. The valuation is based on averages, market trends, and the most recent sale price of the home. The online tools use a vast amount of data to calculate the value of your home. This should, at least in theory, make the valuation fairly accurate. The problem, however, is that most homes are not "average", they are in some ways better than average and maybe in some ways worse than average. 

And while the online home valuation knows what the average value of homes in your geographic area is, it rarely takes into consideration that there could be huge differences between the desirability of two neighboring streets, or even the north end and the south end of the same street. The online valuation tools also lack knowledge of the level of maintenance, recent improvements, etc in your home.

A Comparable Market Analysis, or CMA, is a free service offered by most real estate professionals, our office included. Contrary to the online valuation, the CMA provides you with detailed information on:

• What has recently been sold in your area
• What is listed in your area (your competition, should you decide to list your home)
• What is pending in your area
• What adjustments should be made to the price of all of the above to make them comparable to your home
• A suggested listing price

In other words, a CMA is a more comprehensive analysis of not just the market, but also how your home fits into that market. 

While a CMA is much more accurate than most online valuations it is worth noting that the true value of your home is not really determined until you have a buyer and a solid offer. A home is worth exactly what "the home is being sold for in an open market fair sale".

Conclusion

While the online home valuations can be useful if you want a rough indication of the value of your home, I would highly recommend that you order a professionally prepared CMA from a real estate professional if you are trying to decide whether or not to sell your home.