How Much is My Home Worth?
Sellers may know that a house, condominium unit or any other piece of real estate is worth exactly what a buyer is willing to pay for it, but when it comes time to set the list price for their own home, many seem to forget this important axiom of value.
Some home sellers are frustrated when they have to interview a number of real estate salespeople to find one who agrees with their opinion of the home's value. These sellers blame real estate people if market data suggests a value lower than that inflated by the owner's expectations or needs. These are the same homeowners who are surprised when buyers look but do not buy, put in what owner considers low-ball offers and eventually stop coming to see the property. This homeowner is upset weeks later when the real estate salesperson returns to get the list price "adjusted," often to a price lower than the original list price suggested by the market data provided by other real estate salespeople.
Value is not absolute. It is based on availability, usefulness, need and desirability. Where there are relatively few buyers and many comparable homes from which to choose, individual property values may be lower then sellers imagine. Modern, well-maintained properties with efficient use of space and attractive street-faces will sell for higher prices than properties in similar locations that have none of these features.
Homeowners often confuse cost with value. Buyers are not interested in what the seller has spent on the home: the original cost, the cost of the money borrowed (the mortgage) to buy it and the cost of renovations and improvements designed to suit the seller's needs.
Buyers look for value, which in turn relates to their costs of buying, borrowing the financing and modifying the home to their needs. According to the Real Estate Encyclopedia, published by the Ontario Real Estate Association, market value is "the highest price, in terms of money, that the property will bring to a willing seller if exposed for sale on the open market; allowing a reasonable time to find a willing buyer...and with neither buyer or seller acting under necessity, compulsion nor peculiar and special circumstances
Think of the relationship between property value and the number of buyers in a specific market as a triangle. At the peak is the "one-day-my-prince-will-come" price where there is a theoretical buyer for whom the property holds extraordinary value. Waiting for this buyer, particularly if the property has few truly unique features, may take forever. Usually, buyers who have the money to spend considerably more than market value will chose to move up to a more prestigious neighborhood instead. At the base of the triangle, is the price that is attractive to everyone whether they are currently shopping for a home or not -- the "fire sale" or "it's-a-steal" price that no one can pass up (and no informed seller will offer).
Market value for a property lies between one-third and one-half of the way up from the base, depending on market conditions and the seller's circumstances.
When a property is listed at a price which reflects fair market value, the greatest number of buyers will see value in the property within a reasonable time. Figuring out the market value of a property requires careful analysis of buyer characteristics and goals as well as previous and current real estate listing and sales data for the area. A real estate salesperson, with experience in the area and an understanding of current buying patterns, can help the owner establish a list price that will entice buyers, yet net the seller the greatest possible return.
Tips for establishing the value of your home:
Beware of "front-porch"; value estimates and look for real estate professionals who bring the data to you and help you understand the best listing strategy for successfully selling your home and achieving your goals.
Don't confuse information with knowledge. A salesperson who can punch up a list of recent sales for the area or have the computer select properties by certain features does not automatically have the depth of knowledge necessary to interpret this data. The professional's knowledge should also be based on personal inspection of comparison properties, research into the circumstances of each sale and interpretation of buyer profiles that would be attracted to your property.
Local real estate professionals can tell you what is holding your property
back, but location, still a critical factor, will ultimately limit the value of
the property. Be prepared to put pride of ownership on hold and take an
unemotional look at the data.
No estimate of market value is complete without a comprehensive marketing strategy based on the listing strategy and designed to attract the greatest number of qualified buyers within the shortest possible time, with the minimum number of hassles.