"How much can I get for it?" This is usually one of the first questions I am asked when meeting with prospective sellers for the first time. When I give them my answer, some sellers smile and some grumble. And they want to know how I came up with my estimate. Since agents (unfortunately) don't have a sixth sense that tells them how much a particular house is worth, they are forced to spend some quality time in front of a computer and create what's called a Comparative Market Analysis (CMA). This report will use cold, hard market data to pinpoint the most likely range of values that your home falls into. How does it work? A Comparative Market Analysis will compare your home to several of each of the following:
1. Active Listings - The homes that are currently available for sale will be your direct competition. Their sellers are vying for the same buyer that you are, so your asking price should be set accordingly.
2. Expired Listings - The homes that do not sell within their listing period are called Expired Listings (and their owners are called Angry Sellers). The three most common reasons for a home failing to sell are its condition, its location or, most likely, its price. Since the expired listings shown in your CMA must be comparable to your home (meaning, among other things, similar condition and location), it's their prices that will be of special interest to you - they will tell you what's too high.
3. Sold Listings - The only time you know the exact, precise value of a home is when it is finally sold. That's why looking at recently sold comparable homes is so useful - we know their exact value, so we can more accurately estimate the value of your home. The sales prices of recently sold homes are the best indicators of what you can expect to get for yours. In order for the CMA to be accurate, the comparable properties (the "comps" in Realtor-speak) must really be comparable to your home. This means the same number of bedrooms and bathrooms, the same type of home (two-story, ranch, etc.), similar square footage, close in age, etc. They also need to be close by. As we all know, the location is super-important, so comparing two homes that are identical, but three miles away from each other, is quite silly. And in the case of expired and sold "comps," they must be recent- what a similar house nearby fetched last year tells you absolutely nothing about what your home is worth today. Of course, real estate is not always simple and straightforward, and many variables can complicate matters. For some properties it is not easy to find enough truly similar comps, so accurately estimating their value becomes tricky. Even when enough comps are found, the prices are not static-they fluctuate, even shortterm. And finally, so much in real estate is subjective-the buyer's perception of the home's curb appeal, décor, light, "feel"-that it's not at all unusual for two seemingly identical homes on the same block to command different prices. That's why working with a local real estate expert is so darn useful-your Realtor knows what's currently on the market and what recently sold, which way the prices are moving, and how different features of your home will appeal to buyers. This knowledge enables a good agent to create an accurate Comparative Market Analysis of your home so that you don't underprice it (and lose money) or overprice it (and not sell it). I wish I had the sixth sense that told me the exact value of each home. Until I develop one, preparing Comparative Market Analyses for my clients will have to do. And if you ever need one, I am just a phone call away.
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