How We Place A Value On A Home

Pricing a home is not an exact science. A home is never "worth" an exact value. What determines the value depends on the method used to arrive at a figure. Most Real Estate agents use the Comparative Market Analysis (CMA). By researching similar properties in the neighborhood, one can quickly estimate a fair market value. A "similar" home would ultimately be those that are exact model matches to the property in question. However, rarely are there enough "exact" matches at the time the analysis is performed. Therefore, the agent often uses any neighborhood property that is within +/- 10% of the target square footage, and that has sold (closed escrow) in the last 3 - 6 months (depending on neighboring activity and current market condition). These similar homes must also share other attributes. For example, a 2 story home with 4 bedrooms is not comparable to a single story home with 2 bedrooms.

After compiling this data, a fair market value is suggested to the client. However, there is another factor - the seller's motivation to sell. A homeowner who has time to wait the market out may select a higher price. But, if the homeowner is in desperate need of selling (relocation, death, loss of job, divorce, etc.), he or she may select a lower price. It is up to you to determine the price acceptable to you based on these factors.

Our method is a little different, and we have found it to be much more accurate in the long run. We have a unique approach called the Price Trend Analysis (PTA). The CMA gives you a subjective picture of the value as of the date it was created. The PTA tells you what the home will sell for given the trends over the last 12 months. At Weichert Realtors, we are the only company that uses this state-of-the-art technique for establishing value, and we have found it to be far more accurate than the CMA.

Since pricing a home is not an exact science, we will give you a price range.  An appraiser will also establish a price once the home is in escrow. However, the appraiser will add or subtract value based on the homes amenities. This may include a pool, remodeling performed, etc. Sometimes, an appraiser reaches a different figure than the agent did, therefore leading to problems if the appraisers opinion is lower than the sales price. It is important to realize that an appraisal is just that...an opinion of value. Different appraisers may arrive at different values, but they are usually within 2%-3% of each other.