So here’s a question. Right now – what’s your house worth?
Any idea? Well, you might not know. But then again, you might!
Because recently you may have received an appraisal, or a comparative market analysis. Or maybe you saw your property tax bill.
But….maybe you’ve seen all of those, and you still don’t know….because all the numbers were different.
It’s not unusual, because a home’s value is calculated different ways, for different reasons.
So we’re going to wrap up both hours of today’s show by looking at what those numbers really mean – to you!
Let’s start with a CMA. You might have had one of those done, right? A Comparative Market Analysis. REALTORS® use this approach to come up with an extremely accurate estimate – of what your home might sell for in today’s market. It’s accurate because it’s driven by data. REALTORS® search the MLS in your area, looking for comparable homes. Homes a lot like yours. Same general size, same age, condition, neighborhood, all of it.
They will look for what sold. And for how much. They will also look at what didn’t sell….that’s important….because if you’ve had 10 sales of homes priced at $500,000 in a neighborhood….but the one priced $550,000 did not sell? Well there you go. The likely reason is they asked too much.
So based on all of that data….they will come up with either a specific number, or a price range for your home. Make sure you talk it over with your REALTOR®, because if you agree, that number will become the list price, when your home hits the market.
OK now let’s move on to another number – the price on the offer. Sure, you might be asking a half million for your house – but the actual offer might be higher or lower. So – is THAT what you house is worth? Well, no. It’s just an offer. And it reflects what the buyer thinks your house is worth. You and your REALTOR® can negotiate that with the buyers side…..and hopefully you’ll come up with a number everybody’s happy with.
At this point the offer becomes the contract. And so it follows the the offer price becomes the contract price. OK? So if you and the buyer agree, in writing to sell the place for $505…..that now the contract price on the property.
Will that eventually become the sales price? Well, if it’ an all-cash deal, with no appraisal contingency – yes.
But if there’s a mortgage involved….and if the all-cash deal DOES have an appraisal contingency….then there’s another step. And that is the appraisal. The appraiser will also look at recent sales in your neighborhood…and also, factors that could ramp up, or ramp down your home’s value. For instance, if the whole street is made up of similar 3BR 2 BA homes, and you have 3br, 1 ba??? You may come in at a lower appraised value. Or, if your house has a deck and a new kitchen and new bathrooms, but the other homes don’t? Your house could appraise higher.
OK. Now. If the transaction moves forward, and the house appraises, and you sell it on settlement day….
That price becomes – the sales price.
And that – is the gold standard.
Because out of all the ways people compute the value of the same house – that’s is the only one that’s not an estimate. Not even a really accurate estimate. Rather, that is the price a buyer paid for the property. And it’s not only the gold standard in accurately setting the value of that home – it also serves another purpose. Because that price will become a comparable property for every other home in the area that’s for sale.
So there you have it.
From the CMA to the list price….Offer price to the contract price….appraised value to the sales price…..no wonder there are so many numbers floating around!
But – I gotta tell you – there are more! More ways your home’s value is calculated! We’ll look at those – in just about an hour right here on Real Estate Today, on our special show ‘Ten Ways to Increase the value of your home.”