The key to estimating the real value of a home in any given market situation is understanding what has been selling, for how much, and at what speed. While knowing what homes in a neighborhood are listing for may be interesting, knowing what they are selling (or closing) for is actually informative. A good set of “comps,” many times called a Comparative Market Analysis (CMA) or Home Valuation, can help compare several homes that have sold in your target area to the home you are interested in. Many factors will nudge the price-per-square-foot value up or down. The quality and type of finishes in a home, upgrades and updating (especially in kitchens and bathrooms), lot size, and building style will all impact the home value a bit, but nothing will change a home’s value like … location. (I know, you expected that.) A good CMA will take the most recent neighborhood sales information into account and will bridge the variations between those recently-sold homes and the home being evaluated. Further, the CMA will outline what homes are listed in the target market currently and how their price-per-square-foot values compare to recently sold units. It is likely that a real estate agent that specializes in your target market will have seen the inside many of the homes recently sold and will be able to compare their features. In the end, the value of a home is based on the demand for it and the supply of similar homes in similar locations. A good CMA will help you decide what your list price (the price you are hoping to get for your home) should be.
Filed under: Decoding the Lingo | Tagged: Comps, Lingo, Price, Valuation
