Commonly Missed Items in Valuing A Home

By
Real Estate Agent with Keller Williams Realty

Assisting your client in determining the value of a home is one of the most important Realtor responsibilities.  You provide the seller with a CMA so that a wise decision of what they should expect to receive on their home.  Will this move make sense, can be afford to make it, do we need to seek a short sale?  We help the buyer understand the realistic value of a home so they can make a wise purchase decision and also understand if they will have a possible appraisal issue.  So many financial decisions are based off your analysis.  Upfront dollars are sometimes at risk based off of your input. 

As an appraiser, I have the advantage of years of experience in valuation which has been an extremely valuable asset for my clients.  I have had the opportunity to teach classes and assist other Realtors with their valuation issues.  I have negotiated on offers that information I submitted regarding the value has helped my sellers achieve higher prices for their homes.  The understanding and defending of value takes your negotiations to a more professional level. 

I have found a common thread over the years of why home values are flat out missed.

• Agent uses a price per foot analysis and fails to at least screen the data to remove homes that are not comparable to the property (homes with negative views, pools, positive views, condition)

• Failure to give credit for condition - that can work both ways, good and bad.

• Jumping to pull in sales from an area that the homes are not the same quality - location is not equal. 

• Site size and amenities - highly treed well groomed home sites are generally worth more that a bald lot.  Recognize the premium or lack thereof.

• Features in a home - granite counter tops, built-ins, upgraded appliance, etc. bring value over a home that does not have these items.

• Smell - If a home has an odor issue, no matter how gorgeous, it will sale for less.

• Flooring - different quality should be recognized and given credit - laminate floors versus handscraped wood floors, newer larger modern installed tile versus old small squares with outdated grout and color tones.

• Older homes - did the updating maintain the integrity of the era and compliment the housing type?

• Pools - like ice cream there are different types, a small lap pool is not the same as a large diving pool with spa.  Learn to discriminate for the differences.

• Location - make sure if at all possible to pull sales from the same neighborhood, same school attendance area, etc.  One variable difference can be key.

• Additions - including an enclosure as the same price as the original dwelling when it is not the same quality of finish.  These types of improvements generally receive a contributory value.

• Elevation of the home - architecture design is important and a factor of quality.  A more modern home has one buyer type and a Tudor home another.  Stay like with like.

Stucco home, wood home, and brick home - compare similar home building types.  A log home versus a brick home may have a different value acceptance in the market.

• Proper square footage - if you doubt the correct square footage of a home and do not have a past appraisal documenting the size, get it measured.  This may save an appraisal issue if the home turns out to be much smaller than thought. 

• Don't just look at sold sale information but also Active and Pending Sales in the area.  This will help price position and understand the current market.

• Sold sales going back 6 months is best but a year may give some insights to specialty areas or homes.

The key to a proper CMA is use common sense.  Ask yourself the question - "if I were to take a buyer out to look at homes are these all homes that would appeal to the same buyer audience".  If it is yes then there is your competition. Keep your eyes open and take notes of the all the features or issues a home has to overcome.  Price cures all!  Understanding and proper care to give out good analysis and information will make you a standout professional and save a lot of wasted time and emotion.

 

Comments (6)

M. Suzi Woods (Gravenstuk)
NOW Sharing the life and spice of the GC one day at a time - Grand Canyon, AZ
Suzi Woods, Prior Independent REBroker in MS

Connie, I am so glad I stopped by to read this article. You brought out many of the issues that I have been irritated with local some appraisers for. I am bookmarking this to refer back to and have recommended it to be featured.

Have you found any particular information on the influence of casino or property value and the influence of nearb railroads on property valuse? Thanks!PS: I grew up in Texas, I am homesick.

PSPS: you should join the appraiser group and add this article.

Feb 05, 2009 12:56 AM
Connie Goodrich
Keller Williams Realty - McKinney, TX
CRS ABR (McKinney Realtor)Texas

Railroad tracks I have come up against for years.  Questions to ask are are their views, if direct there may be a negative value.  How frequent is the railroad use or is it abandoned. If abandoned then is there a potential for it to be used in the future (Dart railway, etc.).  Best advice is try to locate sales with a similar location impact.  That way a projected adjustment is already addressed and you do not have to try to figure out how much to deduct.  Thanks for the kind remarks about this post.  I really feel passionate about proper values which I feel some Realtors take to lightly.

Feb 05, 2009 01:09 AM
Catherine C Capasso
Catherine Cornelia Real Estate - Eastchester, NY
Cottage or Castle, What's Your Dream!

Connie, wonderful points. The items you raise are even more important in a market that has lower inventory and/or inventory that is not really comparable to the property we are trying to market. Pricing is the most challenging task today. Buyers want to see lower prices and if I can come in a little lower with some wonderful added features, I can do a better job for my seller because I get the buyer in the door. The items you point out can't be demonstrated on a listing sheet. Pictures help but can't replace "being there".

Feb 05, 2009 01:14 AM
Steve Shatsky
Dallas, TX

Hi Connie... This is a great compilation of issues that you have so correctly identified as "commonly missed".  Property valuation is something that many agents should spend more time on and work it with a sharper pencil... it's easy to spot a valuation that has been arrived at with little effort and one where the agent has taken the time and cared enough to get down to the details!

Feb 05, 2009 02:56 AM
Kim Dean
www.GoSimplyTexas.com - McKinney, TX
Simply Texas Real Estate - Broker/Owner

Nice list Connie. You really have a lot of key points to remember here. And I couldn't agree with you more on the SMELL of a home! Smoke will drive out some buyers as soon as they set foot in the home!

Feb 05, 2009 06:45 AM
Karen Otto
Home Star Staging - Plano, TX
Plano Home Staging, Dallas Home Staging, www.homes

Very comprehensive list Connie and good for sellers to know too.

For odors in a house try a product called Pure Ayre - you can google it too - it works very well.

Feb 05, 2009 11:42 AM