Understanding Market Value

MARKET VALUE

How a property should be priced.

Market Value is not what a real estate agent thinks nor is it what an appraiser thinks, it is what a ready, willing and able buyer will pay.

There are three primary methods used to estimate the value of a house.

• A REALTORS® CMA (Comparative Market Analysis) based on the recent selling prices of similar homes in the area. Adjustments are made for features that vary from the subject property. Listing agents do CMAs for sellers and Buyer Agents do CMAs for buyers.
• An Appraisal. Appraiser’s charge around $300 for their opinion. Appraisers look at recent sales, replacement cost, and highest and best use. The best way to pick an appraiser is to review a list of their clients or ask your real estate agent to recommend an appraiser.
• The Income approach is used to determine the value of investment property. The investor looks at all the costs, the occupancy rate, and the income potential to determine value.

When a property is priced correctly, it should sell in a reasonable period of time. A buyer will normally look at several properties and make an offer on the one that provides the most value for the money. Studies show that buyers question why a home has not sold when it has been on the market for a length of time. Buyers rarely look at or make offers on overpriced houses. When a house is listed above its fair market value it will stay on the market much longer than comparable properties and it normally sells for less than it should. Seller’s decide the listing price, but their agent has a duty to help them realize their homes fair value.