It’s no secret that sellers want to sell high and buyers want to buy low. But they often come to the negotiating table with very different ideas about price. A fair and objective property valuation can help buyers and sellers find common ground and speed up the negotiation process.
In the end, the property is worth what the buyer is willing to pay. But to help both buyers and sellers achieve their goals, both must have a fair and objective estimate of property value. Unfortunately, even objective estimates are still estimates, and there is no way to guarantee 100% accuracy:
* Appraisals performed by a certified appraiser are not 100 percent accurate.
*CMA (Comparable Market Analysis) and BPO (Broker Price Opinions) conducted by a licensed broker or agent are not 100 percent accurate.
* AVM (Automated Valuation Model) technology is not 100 percent accurate.
All of these methods, when executed correctly, can provide a good indication of the value. Estimating value is a combination of art and science. Regardless of how scientific the approach, the actual sales price is subject to the unique variables of each property transaction: condition of the property, improvements, current market conditions, circumstances of the sale, and individual tastes.
For homeowners, pricing correctly is the key to a successful sale. Undervaluing can result in a quick sale, but it carries the risk of leaving money on the table. Sellers who price too high may find their properties remain on the market, with statistics showing values can erode at a rate of around 1.5 percent per month. Longer sales also increase the likelihood of a “distressed sale” when sellers become frustrated or face difficult financial circumstances.
Likewise, buyers should avoid emotional purchases. It’s common to overpay to “fall in love” with a house. Homekeys ValueKey technology can help establish an unemotional, objective baseline for buyers and sellers so that distressed selling and emotional buying become the exception, not the rule.
The science of MAVs
To determine a good benchmark value for a property, use Homekeys to search thousands of property listings for comparable sales or “offsets.” Homekeys ValueKey tool uses advanced statistical models and proprietary algorithms and formulas to find the best available comparable properties. In addition to property characteristics, the system evaluates how recent comparable sales are and how close properties are to the property being evaluated. Once the property’s base value estimate is determined, it’s time to check active listings to see what price similar properties are selling for. ValueKey searches active listings offered by owners and brokers to find the most comparable properties available.
The art of MAVs
The artistic part of estimating value begins with understanding how comparable sales and active listings compare to the property being appraised. Since they’re close, it’s a good idea to drive by comparable sales and listed properties to see how they compare. To help you stay organized, you may want to use a buyer’s checklist when you visit properties.
After researching comparable sales and active listings, it’s time for the personal touch. Sellers know their property and neighborhood better than anyone, so they can adjust base values based on individual property characteristics. Buyers can make similar adjustments when viewing properties to help formulate a sales price.
Depending on your research, a “market adjustment” may be warranted. If active listings are priced higher than their base appraised value, an upward adjustment may be appropriate. If prices are lower, a downward adjustment may be necessary.
Finally, ValueKey allows buyers and sellers to make further value adjustments based on individual property features and conditions. Based on the seller’s knowledge or the buyer’s research, appropriate value adjustments can help both parties arrive at a fair selling price.
And while no property valuation system is perfect, AVMs can provide objective valuation estimates quickly and cheaply, and technology is improving all the time. As AVM technology continues to evolve and improve, it may prove key to smarter, less stressful real estate transactions in the future.
