Effectively pricing listings and the appraisal process

How is a listing price determined?

A real estate professional bases their opinion of a home’s value on properties which have sold within the recent past which are similar in style, size, age, condition, location and site size. These sales are the deciding factor in determining a home’s worth. Pricing a home within a reasonable range of the sale prices of these similar homes is key to selling a property within a reasonable amount of time. Careful consideration to current market conditions must also be a factor in determining a listing price. Has the market increased, decreased or has it remained stable? You may be in a market where there is a shortage of inventory and multiple offers, however this does not necessarily increase the value of your home. Multiple offers are typically based in emotion and would not be a true indication of value in the market.

Do all improvements increase a home’s value?

No. Often, improvements like new or updated mechanicals, roof, siding and windows do not increase the value of a home. This is because a buyer expects these to be fully functional and have a reasonable life. These improvements are considered standard maintenance of a home. The updates may make a home more marketable or preferable over another property, but not significantly increase its value. The same goes for things like replacing faucets or interior paint. It is also very important to remember that often improvements done to a home were done to satisfy the homeowner’s taste or lifestyle. A potential buyer may not place as much importance on these improvements. A good example of this may be an inground pool. Not all buyers consider an inground pool something they would be willing to pay for. In fact, the inground pool may turn buyers off, especially those who might not want to spend money for upkeep and maintenance or those who have young children and would be concerned for their safety around a pool. Another example might be extensive landscaping. The homeowner may spend considerable time outdoors and as a result wanted a yard which complimented their lifestyle, yet a buyer may not spend a lot of time outdoors at all and would not consider the landscaping of importance. Something else to consider; cost does not equal value. In other words, just because a homeowner paid $20,000 to finish their basement does not mean it will increase the value of the property by the amount of money they paid for the improvement.

How does the appraisal process work?

The appraiser will conduct a search of sales based on the same criteria noted above. Once relevant sales have been determined, the appraiser conducts a comparison between the home being appraised and the relevant sales. Adjustments are made for negative and positive factors of the sales as compared to the home being appraised. Those adjusted values are what the appraiser bases their opinion of value on.

Are online home valuations accurate?

Absolutely not. Places like Zillow and other online valuation sites use their own algorithm. These algorithms do not consider condition or location – two of the most important factors in the valuation process. They are also not required to adhere to any standards or guidelines as a knowledgeable and licensed real estate professional would.

Tammy Heeber Certified Residential Real Estate Appraiser Appraisal Source, LLC (860) 543-4213 tammy@ctappraiser.com