home value

Your Home is Worth How Much?

Your Home is Worth How Much?

Your home is very special to you – no doubt it holds many warm memories, but buyers who are looking at your house have just looked at lots and lots of them and your home is just “the  fifth one they saw today”. Unless it’s a perfect match, your home is no more special to them than numbers 3 or 18 were. Therein lies the challenge when thinking about pricing your home.

In very basic terms: Real estate is a commodity, not a product.

With a product the manufacturer makes something, then establishes the price it will sell for. They advertise it, and the public either buys the product or not at that price. Think clothing, TV’s or furniture in a store.

With a commodity, the sellers set an “asking price” and then buyers decide their “bid price”. The buyers assign their own value based on two things: one, what is happening in the market … prices fluctuate daily and are influenced by supply and demand and two ,what are their perceptions of the value of the exact facts, features and benefits inherent in that commodity. The potential buyer’s perception of value determines what your property is worth to them. Think auction.

Also, with all commodities and especially real estate there are two market trends – either appreciating or depreciating which depend on the laws of supply and demand. When fewer properties come on the market than go off, there is a shortage of inventory and prices go up … this results in an appreciating market. When more properties are coming on the market than are being sold, there is an oversupply of inventory, and prices go down … this results in a depreciating market. We are currently in a flat or slightly appreciating market, just having snapped out of seven years of depreciating market.

Your potential buyers are comparing your home to similar ones in your town as well as similar towns. They are visiting other homes for sale that are comparable in size, style, condition and location. They see what your competition is asking, and are also working with their agent to see what comparable homes sold for in recent months. Putting all of their observations and data together they are determining their opinion of the fair market value of your home. Hopefully you too have done some research and have come up with a reasonably similar fair market value and price your home accordingly.

The bottom line is: your buyer is an educated consumer and in real estate both sellers and buyers have to agree on the fair market price of a property in order for it to sell. If you price your home based on your emotional evaluation of how “special” it is, and not what it is worth compared to similar ones in the eyes of a buyer you will lose time and money. Yes – money. A recent study by Zillow, the real estate portal, suggests that overpriced homes actually sell for less money (when they do eventually sell) than if they had been priced correctly from the start.

Of course your home is priceless to you, but it’s the only thing you have to sell … to the home buyer it is not the only choice out there. Because of that you’ve got to be priced at the point that buyers agree with your positioning as it compares to all the others you are competing against. If your thinking of selling, give me a call I can help you sell your home, my pricing accuracy is over 97% list to sell ratio (without any price changes).

How much is it worth?

How much is it worth?

In the real estate industry, the concept of value is vague.

The value of a house (or condo, or co-op, or townhouse) fluctuates often, based on many situations, such as an ever-changing market conditions, the condition of the home, and the costs associated with owning it.

For that reason, it’s difficult to answer the question, “How much is it worth?”

There is one certainty, however.

The answer to true value does not lie in how much the seller wants for his or her home (though that is what the seller and the listing broker want you to believe).

In fact, the listing price of a home sometimes has nothing to do with its market value.

Figuring out how much a home is actually worth is a tricky process. You’ll have to do your homework, pull out your calculator, and spend some time learning to recognize certain “value markers.” Once you’ve figured out what a property is worth relative to others that are similar in the area, you can begin to compare various homes.

Where a home is located (within a city, within a neighborhood, on a particular street, within a single building) is crucial to determining its value. When you begin to compare homes, it’s important to factor location into your house valuation formula.

First, think about where the house is located in relation to the entire neighborhood. Are shops and various services within walking distance? Is the house close to major forms of transportation and to the schools your children will be attending? Is it too close to any of these amenities? Many families want to be within a few blocks of the local public school, but they prefer not to have their backyards adjacent to the school playground.

Next, think about where the house is located on its block. Is it on a corner, or on the interior row? Is it next to a high-rise building or a three- or six-flat building? Are there many homes just like it on the block? Does the block have a nice residential feel or is it mixed residential/commercial?

With Townhouses, Condominiums or co-ops the location is critical

If you’re considering a townhouse, start by asking yourself about the townhouse’s location in relation to shopping and service retailers, such as a dry cleaner.

If the townhouse is located within a subdivision, compare its location with the premium location within that subdivision. For example, is it better to be located on the perimeter, or is an interior location better? Are end units more prized, or are middle units preferred? Are you close to the entrance of the subdivision, or do you have to drive several blocks to get there? Do you have to walk far to the garbage drop-off or mail pick-up spot?

The location questions for a townhouse apply for condominiums and coops as well. If your condo or co-op is located in a high-rise building you also need to consider where the unit is located in the building. If one side of the building has a fabulous view and another faces a windowless brick wall, you can bet that units with the full view will be more prized than units with a peek-around or no view.

Which is more important to you, the lower cost or the better view? If there are two views — say, a water view vs. an urban view, an east view (sunrise) vs. a west view (sunset), or a high-floor vs. a low-floor perspective –remember that a unit with the best view in a building will generally appreciate faster than a unit with only a so-so view, even if the so-so has more amenities.

Using Zillow? You Might Be Surprized.

Using Zillow? You Might Be Surprized.

Why Zillow can get your home value wrong

While I personally believe that Zillow is an awesome product and enjoy the creative thinking that has surrounded it, there are a few things that you need to know when using their estimates of home value, or what they call “zestimates”.

They use public records instead of multiple listing service data. Depending on the town or city your home is located in, the public records are notoriously inaccurate, especially when it comes to finished area and living area.

Multiple listing service data is entered by realtors who are responsible for the accuracy and while it can also be imperfect, the MLS data is much more likely to be correct.

Because the algorithms in Zillow are heavily reliant on living area and cost per square foot, these public record inaccuracies can introduce a statistically significant degree of error into their estimate of home value.

They use a radial distance from the house location to select comparable home sales in the vicinity.

In other words, they will select all houses within a half-mile radius of the subject property that have been sold within the last 6 months.

While this makes absolute sense, mathematically, it doesn’t make sense in the real world.

The reason is, that if a property is on the edge of two different zip codes of highly differing socioeconomic strata and real estate values, the results will introduce a statistically significant degree of error into their estimate of home value.

For example, a house in South Wayland commands considerably more in price than a house in North Framingham, but Zillow will include houses in North Framingham that are within a half-mile of the Wayland house when figuring their “zestimate”.

Zillow is very good at analyzing quantitative factors (facts) but doesn’t yet have the capacity to include qualitative (feelings) factors, what we realtors call the full 360 degrees.

There are a number of highly subjective factors that help to determine a home’s value, and these factors are constantly changing with trends and popularity of … colors, materials, lifestyles and family makeup, just to name a few.

And last, just as you can check-out a car on many great websites, commercials, movies and in pictures, you don’t really know how you’d like it until you drive it.

Imagine yourself test-driving dozens of cars and then comparing them with someone else who’s only looked at them on websites, who’s opinion of value/drivability/comfort do you think would be more accurate?

So in summary, I believe that Zillow is a great website and I think it is very good at coming up with a blazingly fast sweeping generality of a home’s value. But in its present form, it will not replace the complete market analysis of an experienced, full-time professional realtor.

For a really accurate market analysis of your home by Mike Hunter contact me, I’ll be glad to help you.

%d bloggers like this: