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Establishing Property Value |
When people are interested in buying a property, they'll often do some preliminary research on the internet, but sooner or later, they'll usually end up contacting a Realtor. Why? Because Realtors usually have access to many properties listed for sale in a given area, and they have a good understanding of area property values.
Obtaining a Real Estate Sales License does teach the fundamentals of real estate transactions, but it doesn't teach a person how to "know" individual area property values. So how does a new agent learn area values? They get training! Many real estate offices require agents, both new and experienced, to attend weekly caravans of all newly listed property in their area. This accomplishes two things. First, it allows the agents to know which properties are available, second, it provides constant exposure to different properties with different amenities and prices. That repeated exposure to different properties is the basis for "knowing" property values.
The previous sales of property "comparable" to a property you are interested
in, is the verification of a value you believe to be correct, and is widely used to
establish actual property market value. While it's fairly rare to find exact matches to
any specific property, comparable sales will always be recent sales, in fairly close
proximity to the property you are interested in, and they should be fairly close in age,
square footage, and condition.
Subject Property: 3Bed, 2Ba 1496 sq ft built in 1958 good condition
Comp 1: 3Bed, 2Ba 1482 sq ft built in 1958 average condition sale price $610,000
Comp 2: 3Bed, 2Ba 1358 sq ft built in 1956 good condition sale price
$685,000
Comp 3: 3Bed, 2Ba 1360 sq ft built in 1957 good condition sale price $680,000
Comp 4: 4Bed, 2Ba 1864 sq ft built in 1956 good condition sale price $635,000
Comp 5: 3Bed, 2Ba 1358 sq ft built in 1956 good condition sale price $635,000
Prices and home size will vary by area, but the same principles will apply. Comp1 is same size and age, but property wasn't in the same condition as other area homes. Comp2, slightly smaller, but same room count and condition. Comp3, slightly smaller, but same room count and condition. Comp4, much larger, but on a corner lot in the next tract over. Also impacted by being on an entry street into the tract. Comp5, slightly smaller with same room count, but backs to a sound wall separating the residential tract from a commercial shopping center. Best comps will be 2 & 3, which puts market value at $680k to $685k. Final determination of value will be determined by active listings, or properties currently listed for sale. If a lot of homes are listed for sale below the target market value, you'll adjust the value down to that level. If there are very few listings, and the list prices are at, or above your market value, you adjust your value upwards.
Every weekend, and every day when you have the opportunity, look at houses and visit open houses, keep all the information and brochures you can get. Some newspapers will list recently sold properties, drive by all of those and write down your impressions of the property and it's sale price. When will you actually come to "know" area values? Each person's experience will vary, but somewhere between 50 and 100 homes viewed things will start falling into place. If you want to really know an area, and know it well, you'll never stop looking at properties.
You can start looking for Real Estate for Sale at Realtor.com
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Establishing Property Value |
