How Your Property is Valued

A Crash Course in Appraisal & Pricing

Please Note: This article addresses key points with regard to the valuation of residential properties.  Valuation of commercial properties is much more complex and is beyond the scope of a short summary.  

If you own a commercial property and have questions or would like a value estimate, please feel free to call.  I have extensive commercial appraisal experience.

FREE Market Evaluation or feel free to call me direct at 281-655-9556 for a no-obligation and confidential value estimate.

Complementary Home Staging Consultation

Importance of an Accurate  Valuation

 


When you consider selling your home, the importance of properly valuing your home cannot be understated
There is one constant in real estate. That is, the market is constantly changing.
 

Too High: Pricing a home too high usually translates into a lower eventual sales price in the long run. (More
 

Too Low: If your home is priced too low, it will usually sell quickly. However, seller's typically  want the highest price for their home. (More


Just Right: Pricing your home competitively, given current market conditions, attracts the highest number of prospective buyers.  (More
 

Basics

 


Market Approach to value? Cost Approach? Comparable Sales? Income Approach?  Price per SqFt? Location?  Supply and Demand?  Adjustments?   Many buyers, seller, and real estate professionals look at price per SqFt as a guide to a home´s value, however price per SqFt, although useful, is merely a guide.  The market approach to value is usually the most appropriate method of valuation for residential properties.  This involves analyzing the most appropriate comparable sales in the area relative to your home.

Once the most comparable properties are identified, value adjustments are made for the differences between the subject property (your home) and the comparable properties.Differences could include a home size, land size, pool, bedroom count, overall condition, upgrades, roof age/condition, siding condition, floor plan, specific location, in or out of a flood area, curb appeal, how well your home shows, age of the HVAC unit, etc.  Time is also a legitimate adjustment.

Valuation

Details


Attention to the details:  A detail market analysis, or appraisal will illustrate comparable properties that have sold, preferably recent sales and preferably sales in the same neighborhood.  To account For the differences, there will be an adjustment (+ or -).  Each of the comparable sales will have a series of adjustments and a total value. The adjusted value is indication of market value based on that one comparable.  The next comparable sale will have a total adjusted value which shows an indication of market value based on that comparable .. and so on.  You want a minimum of three comparable sales; five is better.  On occasion, more than five will be used.

 

 

*** SEE EXAMPLE BELOW ***

  * As you can see, price per sqft is merely a guide.
 

The Final Value Estimate

 

Arriving at a final value estimate: After the real estate professional arrives at an adjusted price for the comparable sales, they will estimate how relevant each of the comparable sales are by assigning a weight to each of the comparables. For example, if there are three comparable sales, they might all be equally comparable.  In this case, the adjusted prices will averaged.  However, if one was more comparable than the others, their weight might be distributed as follows: one sale with 50% and the other two at 25% each; or 50/30/20 or whatever.

The market value estimate also depends on current market conditions at the time.Some questions to consider: Is the market trending up? Is it stable?Or is it trending downward?  Are interest rates expected to rise?

The Right Asking Price

 

The key to optimizing your sale price:  If an appraiser or Realtor actually spends the time necessary to thoroughly analyze the market, you will get a fairly accurate estimate of market value.  An appropriate asking price is key to optimizing your sale price.  Asking too much typically hurts you in the long run.  Many buyers are reluctant to "insult" sellers.  The home usually stays on the market for a longer period of time and the home can be "stigmatized".  What is wrong with the house?  If the home is obviously over priced, many buyers and real estate professionals will assume the seller has unrealistic expectations.The market (buyers) ultimately set the eventual sale price.

Direct Competition

 

What are other people currently asking for their homes?  Another consideration in setting your asking price are competing homes; what is currently on the market?  Seller´s want to be competitive with other available properties.If other homes are a better bargain relative to your home, the choice becomes obvious in a buyer's eyes.

Other Neighorhoods

 

The bigger picture:

Another not-so-obvious consideration is how other neighborhoods are doing.  After a thorough market analysis is completed, it is prudent to "shop" around for homes in the area in the same price range.

Buyers have a picture in their mind what they would like to buy, but until they shop and see what is actually available in the current market, they won't know how the current home market will suit their individual tastes.

For example, if the market value estimate of a home is $200,000 and the proposed asking price is $209,000, I will search to see what is available for $209,000 +/- in the area.Experience has taught me to weigh what is available in the subject neighborhood as well as other neighborhoods buyers might consider.

It is also a prudent to consider new home inventory.The residential real estate market will often see price shifts between new homes and established neighborhoods. 

By the same token, specific geographic markets keep others in tact; the north side vs. the south side or west side; urban living vs. suburban living. The savvy buyer keeps the two markets in balance.

The process of evaluating buyer´s options helps solidify the market value estimate.

A Final Note

 

Don't forget the most important things:  Real estate appraisal is an industry in itself.This article is a condensed version of how value is approached but contains valuable information.The most important considerations when selling your home is pricing your home to arrive at the most appropriate price based on current market conditions and presentation of your home to prospective buyers.With 20+ experience and detail oriented nature, that´s where I shine.


If you have questions about commercial property, I have over 9 years of commercial appraisal experience.  Feel free to call. 

 

I hope this answers some of your questions regarding pricing your home.  If you have any additional questions about appraisal or the process of buying or selling, please feel free to call.

Call or email for your FREE Market Evaluation

Complementary home staging consultation.

Best Regards,

281-655-9556 direct anytime
chrisb@pdq.net

 

Thank you for visiting today. If this is your first visit, take your time and look around. I have plenty of information and resources available to you. If you are a return visitor, thank you. I would love to hear from you and tell you how I can serve all your real estate needs.

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Chris Broussard

16102 CUTTON RD
HOUSTON, TX 77070
Phone: 281-414-3902
Email: chrisb@pdq.net

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Thank you for visiting today. If this is your first visit, take your time and look around. I have plenty of information and resources available to you. If you are a return visitor, thank you. I would love to hear from you and tell you how I can serve all your real estate needs.