Estimating Property Value: How We Determine the Right Price.

Today we are discussing how real estate agents determine the market value of a property. Market value, or fair market value, is the price that a property is estimated to be valued and should sale for. Remember that we are NOT appraisers. Buy focusing on the right metrics for estimating property values will help avoid issues when the appraisal takes place.

First, this is the most common approach I utilize. I start reviewing recent sold, expires, pending, and active sales in the area. Distance from the subject property and time frame it’s all market dependent. I focus on several key metrics when it compares to the subject property: location, sq footage, age of the property, # bed/bath, lot size, and more. There’s a small +\- range to each metric, because comparable aren’t always perfect and can be hard to identify.

Second, i analyze the condition of the homes as it compares to the subject property. Knowing how much it may cost to bring the property up to date can also be taken into account when estimating market value. This form of evaluation is typically important to investors looking at value add opportunities.

Finally, external factors in the local market may apply. If the local economy is thriving, they may estimate higher values than in a depressed economy. Other external factors, such as anticipated development nearby, may also be taken into account. Again, this is mainly a more important metric used for investors types of clients.

There are a ton of more types of evaluations, especially on the commercial side, but I won’t be touching base on that.