Web searches for “what’s my home worth” have been getting a workout during today’s blistering housing market.
I recently ran one and Google found 4,670,000,000 results.
Scroll through a few pages of links you’ll find item after item promising to show your home’s value if you sign up for a service or calculators. There are also blogs and articles – some better than others – that discuss or attempt to explain market values.
A better question would be “what’s the fair market value of homes” and insert the name of the town or city you’re shopping. Fair market value is the price that a willing buyer will pay to an unrelated but willing seller.
When you plug that into Google responses drop to six figures. That’s still a lot of information, but what you won’t find is a credible answer. You may get something in the ballpark, but don’t bet on it.
The truth of the matter is the only way to find out what your home’s worth is to sell it. That may sound harsh, but fair market value is impartial, and it fluctuates.
Sometimes that’s a thorny issue for buyers and sellers to internalize. It’s also a fact of life that most homeowners overestimate the home’s value.
A critical item in a REALTORS® toolbox when working on this question with clients is a competitive market analysis (CMA).
The CMA has dual roles. It’s part of the listing process. It can also be a check-and-balances item for negotiations. Look at it as the marketing and negotiations benchmark toward the property’s fair market value.
Here’s how a CMA is done.
The agent does a database search for comparable properties that have recently sold. Recently sold and comparable are keywords.
Homes with the same number of bedrooms, baths, square footage, and basically in the same condition in the same or nearby neighborhoods is the baseline. Recent sales are essential because sales that are too old don’t reflect current market conditions.
Sellers and their REALTOR® looking for a quick sale in a buyers’ marker can use the CMA to find the sweet listing spot that’s typically somewhere between the listing and asking prices. In a sellers’ market like the one we’re currently experiencing, the sales price as a percentage of listing price tends to get more attention.
In January sellers were getting 96 percent of the median listing price. The median is preferred over the average because it’s the price point where half of the sales were for more and half were for less. It’s used by real estate professionals because it’s less affected by outliers – sales that are substantially higher or lower than the market pattern.
Unless the sale is an all-cash deal, the next step on the path to the closing table is the appraisal.
An appraisal is a detailed assessment performed by an independent professional appraiser. It should include a physical inspection of the property, verification of data through public records, an analysis of general market data, and the application of a valuation approach that is carried out according to professional practice guidelines.
It’s the point where lenders sign-off on a deal. If the appraisal is below the buyer and seller’s agreed-on price, something has to give.
Currently, getting the approved offer and appraisal in sync is more problematic than it was during the last buyers’ market.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee – Southwest Virginia region representing over 1,400 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee.