An impartial evaluation of market trends and activity is the most effective way to estimate a property’s fair market value.
The Comparative Market Analysis (CMA)
Since location and property characteristics are the key elements in determining property value, we need to use similar (comparable) properties in your area to establish the basis for valuation.
A Comparative Market Analysis (CMA) considers similar properties that:
Are currently on the market (active listings)
These are properties that will be competing with your home for the attention of available buyers
Have pending sales at this time
This shows homes that are currently under contract, but have not yet closed. Since these properties have not closed, their market value has not become public knowledge. However, these properties are a good indicator of the value of the current market and the list prices that are attracting “real buyers.”
Have sold in the recent past
This shows us what “real buyers” in this market have actually paid for properties that are similar to yours
Failed to sell
These are properties that have been withdrawn from the market or have expired listing periods. Understanding why these properties did not sell can help us avoid disappointment in the marketing of your property. The listed price of these homes may suggest prices that are higher than buyers are willing to pay.
The Comparative Market Analysis considers the asking prices, relative quality, and the quantity of properties that are competing with your home on the market to help us establish a pricing strategy.
Factors that DO NOT affect “market value”
When considering the value of your home, it is important to note that the following factors have little or no influence on the market value of your house:
- The price originally paid for the property
- The profit or returns that expected from the sale of the property
- The amount of cash needed from your sale
- The amount invested in property improvements
- The tax assessed value of the home
- What other sources have told you your property is worth, including friends, appraisers, online automated valuation sites other real estate professionals.
The value of your home will ultimately be determined by the real estate market. As prospective buyers research properties, they will quickly gain a perspective of the relative value of different properties. When they are ready to make an offer on a property, they consider the following key factors that affect the selling price of your home…
Location is the single most important factor in determining the value of your home.
Prospective buyers compare your property against competing properties that have similar features. Buyers will perceive value based upon properties that have sold or are available in the local area.
Property values are affected by the current real estate market. As the real estate market cannot be manipulated, a flexible marketing plan should be developed that analyzes the current marketing conditions and individual features of the property.
The condition of the property affects the price and speed of the sale. Since prospective buyers often make purchases based on emotion, first impressions are important. Optimizing the physical appearance of your home will maximize the buyer‘s perception of value.
Pricing your home properly from the beginning is an important factor in determining the length of time it will take to sell your home. Reviewing this home marketing plan will assist you in determining the best possible asking price.
A property that is priced close to the expected Market
Value tends to generate the greatest amount of interest from qualified buyers.
A competitive asking price results in more qualified buyers who will include your home in their property search.
This creates an opportunity for buyers to develop an emotional connection to the property. Once an emotional connection is created, there is a greater chance that the buyer will accept a higher sales price or other terms that are favorable to you, the seller.
Additionally, a property that is competitively priced:
- Takes advantage of the prime marketing momentum that occurs when the property first comes on the market.
- Generates an increased number of showings
- Generates increased number of offers
- Generates realistic offers
- Sends a message to buyers about your motivation to sell
- Creates ease in the appraisal process
Experience has shown that the closer the gap between the perceived market value of the home and the asking price, the more likely you are to receive an offer.
Generally, homes that are priced more than 5% above the expected market value, will not receive purchase offers.
You increase your chances of obtaining a timely sale at or near your asking price, when the price is substantiated by comparable sales information.