Many CMAs prepared by Realtors value the property by the Average Price Per Square Foot Method. The key word to focus on is AVERAGE. This type of valuation assumes the home is average and just like the typical home found in the neighborhood/area.
What if ...
- The property has been highly remodeled?
- The home backs/fronts a negative influence like a traffic carrier street?
- The lot has a view amenity i.e. golf course, greenbelt, lake, heavy trees?
- The home is a total redo?
- A stigma like an unnatural death has occurred at the home?
- Some improvements/quality added features are present.
- The home has a pool, tennis courts.
- The home is located in a specific school attendance area that is sought after?
- And the list of what ifs goes on ...
As a certified real estate appraiser I have the opportunity to teach and one of my first classes begins with "Do Not Use the Price Per Square Foot Method". The WHY to it's popularity is simple, it's easy. Anyone who can do 3rd grade math can easily master how to use it. You just add, divide and multiply. As a professional we are called upon to give this very critical input to our clients - providing a realist and professional valuation of their home so they can make good business decisions.
To be convincing of why you should work with your clients on listing a home or assisting a buyer on what they should pay you need understand and utilize valuation with adjustments. By adjusting the points of difference for varied characteristics a home has to offer you will be able to determine a realistic range of value that buyers will be willing to purchase the home. A vanilla home is just good and plain, no toppings, well maintained. A chocolate home is rich with amenities and updates, a swirl is a combination of some updates and original features. All are great flavors and all have people that will love what that home has to offer.
Now add toppings and that costs more just like your home's value increases with added amenities like a swimming pool. The next time you are preparing an analysis ask yourself what flavor is the home and how much would a buyer be willing to pay for each topping type.
Keep in mind that "Price Cures All". In our economy, the buyer may not want to pay for the Haagen Daz price tag but more on the Blue Bell scoop cost. The value of the home needs to reflect what the buyers are purchasing. Some of the topping may need to be tossed on top without charge to make a buyer select the home. It all goes to understanding the market and individualizing your home valuation to know what cone will best fit your house.