Step by Step Instructions To Help Home Sellers set an Accurate ask Price
Copyright © 2014- 2019 AUTHOR: Paul R. Marino, REALTOR®, e-Pro®
We live in a culture of instant gratification, so it’s no surprise that in the age of the Internet, deriving the value of a home should be no different. Just type in your address, click your heels three times, and “POOF”, there you have it, an instant home value that satisfies your ego, pays off the mortgage, and leaves you with a boatload of equity left over for the golden years.
Before we get started, let me get something off my chest. I really don’t like broad, sweeping, generalizations. When I hear a national news organization exclaim with exuberance that “Home prices climbed nationally an average of 13.6% in the past 12 months”, I want to cringe. Why? Because the number is meaningless. Ask a homeowner in a suburb of Detroit, Michigan if their home value has rocketed up +13.6% in the past year. You’re likely to get beat up.
The reason that broad generalizations are meaningless, is because all real estate is local. The only thing that matters, is what is specifically happening in your particular state, your county, your town, your neighborhood, and if you really want to know the truth, your individual street. National numbers are fine for the uninformed masses, but you’re smarter than that.
An entire industry has sprung up on the Internet over the past 10 years, providing home valuation services. Some aren’t bad. Some are downright abysmal. I should know. I’ve appraised literally thousands of properties. Let’s take a look at what’s out there on the Web, and see how it can help you derive a realistic home value. In general, the sites providing this service have an eye towards capturing leads for real estate brokers. As in, “Hey, I see you’re researching your home value, so naturally, you must be interested in selling. I just happen to know 1.2 million brokers out there that would love to assist you in this process.”
I must take a small detour here to make a pitch for my fellow brokers out there. If you (a prospective home seller) really have no intention of listing your home with a traditional “brick and mortar” real estate broker, I want you to promise me something. I want you to promise you won’t call up six different brokerage firms, have each of them traipse through your home, and provide you with a value estimate, just to say, “Thanks, but we’re really not sure we even want to sell.” Real estate brokers are, on the whole, very hard working people. They support their families solely off commission. It isn’t easy. OK, back on track.
First off, you should know that any information that a real estate broker can provide you is already available to you FOR FREE. Go ahead, help yourself. Would you like a second helping? That’s right, FREE. Go to REALTOR.COM and up pops a button called “Recently Sold”. Or how about NEREN.COM with the “Sold Properties” button just asking to be clicked. I decided to see how large the variation was in some of the more popular home valuation websites. I selected an actual New Hampshire property and these are the results. I also include the tax assessment from the particular local jurisdiction (just connect to your town's home page, and look for the little button that says “Assessing”).
Here you go: Zillow: $275K Trulia: $327K E-Appraisal: $263K CoreLogic: $306K SmartHomePrice: $335K Town assessment: $275K (after applying an “equalization ratio”, value = $293K) So let’s see - $263K to $335K. Wow, that $335K sure looks good to me as the homeowner. After all, I owe $325K on the mortgage. But what if the $263K figure is the “accurate” one? Here’s what you do. Pick a half dozen of these sites, and jot down your numbers. Throw in the town assessment (equalized, meaning, if your town assessor says that assessments are, for instance, running at 94% of true market value, just divide the assessment by .94 to arrive at “market value”). Average them. In this case, it results in a figure of $300K. Take this number and set it aside. It will serve as a basic starting point.
Now, using your search tool from REALTOR.COM or NEREN.COM, go ahead and conduct your own research. The NEREN MLS database is the “real deal” MLS for New Hampshire and Vermont, and REALTOR.COM merely replicates off MLS. This is the identical database being used by every broker and appraiser in the state. Folks, this ain’t that hard. Find a minimum of six transactions that have sold that match the location and physical characteristics of your home. Do the same for active listings. Try to “bracket” your results. Meaning, locate transactions that are unequivocally superior to your property (this establishes the top end). Now, locate some that are unequivocally inferior (this sets the bottom end).
If you want to perform a quick, rudimentary comparison to your home, do the following. Jot down the assessments for all of your sold comparables. This will provide a good relative comparison. Now, divide these numbers by the actual sale prices. This will result in a ratio that can be applied to your assessment. EXAMPLE: Assessed value = $302K / Sale Price: $338K = 89.3%. Do this for all six transactions. Average them. Let’s say the average = 95%. Simply take your assessment of $275K and divide by .95 = $289K. Now, between the aggregate numbers derived from Zillow, Trulia, E-Appraisal, etc., take the number (in this case $300K), and compare it to your derived estimate of $289K. You are honing in on the target number.
Final piece of work. Take a look at active listings – that is, properties that are on the market now, because this is your real competition, today. Temper your findings by these active listings. There you go. Done. And you did it all by yourself! Be smart. Be informed.
