Ultimately, a home is worth what someone will pay for it.
Everything else is an estimation of value.
A house is NOT worth:
- what you paid for it
- what you owe on it
- what you need to get for it
- what you have invested in it.
It is worth exactly what someone will pay for it!
Everything else, including an appraisal, is an estimation of value.
To determine a property's value, most people turn to either an appraisal or a comparative market analysis, commonly called a CMA.
An appraisal is a certified appraiser's estimate of value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account.
A comparative market analysis is a real estate agent's informal estimate of a home's market value, based on the sales of comparable homes in a neighborhood. A good real estate agent will look at same considerations that the appraiser uses.
I also take into account the current competition for similar homes when I prepare a CMA to establish a listing price in a buyer's market. Most agents will prepare a CMA for free if you are considering selling your house although it's not uncommon for real estate professionals to charge a fee for this service.
A few years ago I hired a appraiser to help me with a CMA I was preparing on a very expensive and unique property. I wanted to be understand how appraisers selected properties to use as comparables when there were no apples to apples homes to use. How do they make adjustments when forced to compare apples to oranges to determine value?
It was money well spent. I discovered that by using my own instincts, the value range I had initially given the home was right on the mark. Because I knew the niche well - I had recently shown or previewed most of the competing homes - my instincts were correct.
Remember that ultimately a home is worth what someone will pay for it.
However, if a buyer needs a mortgage to purchase a home,
they won't be able to pay any more than their lender's appraisal,
even if they are willing to pay more.
If you would like my expert assistance in preparing a CMA for your home, please call me. Getting a GOOD estimation of value will empower you with the information you need to choose how to intelligently move forward with the sale of your home.
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