An excerpt from my recent Blog:
One of the most commonly asked questions in real estate, and sadly,One of the most inaccurately answered.
One common misconception of homeowners is to base a homeâ€™s value on the list price of other homes currently on the market. The obvious flaw with this concept is that a seller can ask any amount of money they want for their home, that doesnâ€™t mean that a buyer will buy it, or that a lender would be willing to finance it at that price.
Another erroneous method of many sellers is to determine their propertyâ€™s value based upon what was paid for the property, how much they have invested in improvements, and what kind of profit they would like to make. Unfortunately, there are many homeowners today that bought at the height of the market and now find that their property is no longer worth what they paid for it. This is a painful reality for many homeowners who struggle to accept the current value of their property.
The real barometer of current value is what recent buyers have been willing to pay for similar homes in the same area as the seller.
As a certified appraisal will demonstrate, the true and current market value of a property is based on what similar properties in the area have been selling for in the past 3-6 months. An appraiser will compare the subject property to recently sold, similar properties, making many adjustments for square footage, lot size, age of home, construction materials, number of garage bays, the list of adjustments and criteria is extensive.
A certified appraisal is what the lending institution will order when a home buyer applies for a mortgage. The lending institution needs to be assured that the property which will be collateral to secure the loan, is actually worth the loan amount in case the buyer defaults.
Many a disillusioned buyer and seller have agreed upon a price only to find that the appraised Value could not support the sale price and the deal could not be consummated, because the mortgage could not be obtained.
How could this frustrating situation have been avoided you ask? I bring you full circle back to the two most commonly asked questions
Seller: â€So, how much do you think my house is worth?
Buyer: â€œHow much do you think we should offer on that house?â€
The responsible answer from any reputable Realtor should ALWAYS beâ€¦
â€œI wonâ€™t know until I create a Comparative Market Analysis (CMA)â€
While a CMA is NOT a certified appraisal, a thorough and well done CMA created by a proficient Realtor will establish a good estimate of the current market value. A strong CMA can give both buyers and sellers a close idea of current market value, and allow them to make informed decisions based on facts; not arbitrary thoughts or personal opinion.
If you will be asking one of these two important questions of a Realtor, make sure that their answer is backed up with a CMA. If itâ€™s not, find another!
Please feel free to call me if you would like a CMA on your property.
Castle Gate Realty