You have probably seen stories about how the Boston real estate market has been cruising along and you may be wondering what your home is really worth in today's seller's market. Today we’re taking a quick break from neighborhood updates to breakdown some of the factors that go into evaluating a home’s market value. We've outlined some of the most important below:
You’ve likely heard the word “comp” thrown around in conversations with people selling their home or on HGTV. Sold comparables are the single most important aspect in determining general value of a home, however, you have to be careful with what properties you use. Homes which are as little as a block away from each other can be in vastly different “micro-neighborhoods” and can have drastically different values because of this. Try to eliminate as many differences as you can while still allowing yourself a sample of between 3-5 relatively good sold comparables. Once you’ve got a sample of similar properties you want to record each home’s amenities, original price, sale price and the total days on market, along with any price drops. These records can be a major help in determining why some properties may have sold faster and for more money than others. It's also extremely useful in finding patterns in your neighborhood's market.
Under Agreement Comparables
Comparables which are currently under agreement are another hugely important aspect in finding a home’s current value as they give us information about what the market has done in the prior 45-60 days. This information is invaluable because we’re ultimately looking to obtain as much data as we can on what is happening in the neighborhood and where it is trending. Record the most similar pending properties and remember to write notes for them like you did for the sold homes. Are the sale prices trending upward or downward? Are properties selling quicker or slower? Make sure to take note of the answers to these questions. Lastly, before you finish with pending sales make a note of the total number of comparable properties currently under agreement as we’ll be using this number later.
Accounting for Similarities and Differences
Not all comps are created equal and unless you can find 5 identical sales of identical homes you’re going to have to make sure to weight some sales a bit differently. An easy way to do this is to take all of your comps, including active listings, and slot them in order of similarity to the subject property in terms of every factor except price. Typically this slotting will give you a very clear trend in terms of pricing and will illustrate which comps, if any, are outliers. For those of us who are more mathematically slanted you can take this concept a bit further and weight each home in comparison to the subject property, ultimately allowing you to arrive at a pin point value.
Now that you have a good idea of the price range your home would sell in you want to go back and look at the current inventory. How many properties are available in your area? What is the price range? Remember when we noted how many comparable properties were under agreement? How does the current inventory compare to the number of home’s which are sitting under agreement? If the current inventory is low, as it is in most areas now, you can price higher. In times with higher inventory, you’ll want to be a bit more conservative in your pricing if you’re looking for a quick sale. Inventory can fluctuate greatly so you want to make sure you keep up on the current market as your ability to get top dollar for your home may change month to month due to these swings in supply.
A lot goes into pricing your home correctly and it's important to take all these factors into account to make sure you end up with an accurate value of your property. Both overvaluing and undervaluing have their own pit falls, as owners can market their homes at unrealistic prices and see them sit, or undervalue them and miss an opportunity to maximize the return on their asset. If you're interested in receiving your home’s current market value click here.