Estimating Property Value: How We Determine the Right Price.

Here's how real estate agents actually determine the market value of a property. Market value, or fair market value, is the price a property is estimated to be worth and should sell for. Worth noting: we're not appraisers. Focusing on the right metrics for estimating value helps avoid issues once an appraisal happens.

The most common approach I use starts with reviewing recent sold, expired, pending, and active listings in the area. Distance from the subject property and time frame both depend on the market. I focus on several key metrics when comparing to the subject property: location, square footage, age of the property, bed and bath count, lot size, and more. There's always a small range on each metric, since comparables are rarely perfect and can be hard to find.

Second, I look at the condition of comparable homes relative to the subject property. How much it would cost to bring the property up to date factors into the market value estimate too. This piece matters most to investors evaluating value-add opportunities.

Finally, external factors in the local market can shift the picture. In a thriving economy, values tend to run higher than in a depressed one. Anticipated development nearby is another external factor worth weighing, and it's generally more relevant for investor clients.

There are plenty of other evaluation methods, especially on the commercial side, that go beyond what I've covered here.