First Time Home Buyers Guide Episode 5: Comparative Market Analysis for Buyers – What’s your Dream Home Worth?
In Episode 4 of the First Home Buyers Guide Vancouver, we discussed how to efficiently search for properties in Vancouver. So now you’ve found your dream home and you want to write an offer. Now is the time to take a cold hard look at that property to figure out if it’s really worth what the seller is asking!
They Can Ask, But Should You Give It?
List price does not equal market value! Price is almost always negotiable. Very often properties in Vancouver are priced above market value, sometimes they are priced at market value, and occasionally they are priced below market value (See Multiple Offer Situations for Buyers).
Why does this matter? Because once you find your dream home you need to know what the property is worth to prepare an initial offer and to have an idea of what sale price you will eventually negotiate, but more on that later.
Comparative Market Analysis – How I Calculate Market Value.
To figure out what your dream home is worth, I use a process called Comparative Market Analysis (CMA). Here’s how I do it:
1. First I visit the property. This is the only way to get the clearest possible picture of all the unique aspects of the property that contribute to its market value. Be wary of anyone who tells you they know a property’s exact value sight unseen.
2. I look at comparable properties or “comps” that are similar to the property of interest based on criteria such as age, size, location, builder, exposure, number of bedrooms, etc that have sold in the last 30 to 90 days depending on what’s happening in the market (30 days if the market is volatile, closer to 90 days if its not) as well as comps that are available on the market at present.
3. I look at what’s happening in the Vancouver real estate market overall using the REBGV Monthly Sales Statistics as well as what I am seeing in my business.
4. What’s happening in the economy overall.
I then take this data, analyze it, and present the Buyer with a brief report on what the market value of the property is. We then use this information to decide what price we will start at with the offer we are going to write on the property.
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