Our team has recently taken on a new agent, and during our training process, he brought up an interesting question: How do you determine what a home’s price should be?
As you already know, agents determine price by completing a comparative market analysis (or CMA). But what exactly goes into this process?
Personally, I like to dive deep into local market data when I complete a CMA. I don’t just draw a circle on a map when looking for comparable homes. Instead, I think critically about which neighborhoods are most similar to the one surrounding the property in question.
After all, a home’s value is as much about its location as it is about the home itself.
“It takes a lot of due diligence to come up with a fair and accurate home value.”
Once I’ve narrowed my search by location, it’s time to look for homes that have comparable features. This means finding properties with similar square footage, similar upgrades, and a similar lot size to the home I’m attempting to price. A 2-bedroom, 1-bathroom rambler would have a much different value than a 4-bedroom, 2-bathroom ranch, for example. The goal is to compare apples to apples.
If the home in question is particularly unique, you may need to broaden your search. It’s more difficult to find comparable properties when the home you’re assessing is essentially one of a kind.
Setting a home’s price is all about focusing on its distinguishing features and then searching for data that shows how much value these features might bring on the market.
In addition to these factors, my team and I also consider a given area’s “market velocity.” In other words, we factor in both where the market is today and where it’s headed in the future when we set prices on homes.
The bottom line is that it takes a lot of due diligence to come up with a fair and accurate home value. Armed with the right knowledge, though, you will be well equipped to guide your clients to the right price for their home.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.
