When planning to sell your home, coming up with the right selling price may seem like a very difficult process. There is a lot of data to sift through and you might feel a little lost. However, with some careful investigation and calculations, you can come up with a good estimate of your property's market value.
What is the market value?
Market value is how much a home would sell for under normal conditions. This excludes sales where the buyer or seller is under pressure to act, perhaps due to career relocation, the death of a family member, or divorce. Market value is basically an educated guess, but it can be fairly accurate if you apply the right method and consider all the important details.
A number of factors may affect your home's market value, including:
External characteristics - "curb appeal," home condition, lot size, the popularity of an architectural style of property, water/sewage systems, sidewalks, paved roads, etc.
Internal characteristics - size and number of rooms, construction quality, appliance condition, demonstrated "pride of ownership," heating type, energy efficiency, etc.
Supply and demand - the number of homes for sale versus the number of buyers; how quickly the homes in your area sell.
Location - desirability for a particular school district, neighborhood, etc.
How to estimate your home's market value?
We recommend you use the sales comparison approach to estimate your home's market value. This is the primary method used by professional appraisers and real estate agents to determine the market value of homes.
- Begin by researching recent sales of similar properties in your local area. The sale prices of these properties will provide a good starting point in estimating your home's value. Try to find sales of at least three properties that are comparable to your home. If possible, make sure these properties were sold under normal conditions. You only want properties sold at market value.
- Unfortunately, you probably won't find an exact comparable sale. To account for this, you need to adjust the sale prices by adding or subtracting the estimated value of any home improvement or differences between your home and the comparable properties you identified in step 1. This will require some analysis on your part to determine whether these differences increased or decreased the sale price, if so, by how much? The adjusted sale price is your estimation of what the property would have sold for if all the characteristics were the same.
- Seek the help of your local real estate agent. Realtors have plenty of experience in your area and are aware of recent sales. Even if their office didn't make a recent sale in your area, they have access to the MLS system which gives them access to detailed information about recent sales that are comparable in your area. They can also provide up-to-date awareness of the market conditions and other parameters that affect the selling price.