Best sources for the asking price
It's stinkin’ hard to be objective about your own home’s value. Owners come to accept–and dismiss–the minor and sometimes major drawbacks in their own homes. Whether you’re going to list or sell on your own, educate yourself about values.
A CMA (Comparative Marketing Analysis) is the answer. It’s the process real estate agents use to provide their opinion of a property's value. The agent usually accompanies this no-obligation, evaluation estimate at no cost. And why shouldn’t they get the Oscar for Best Source, this is what they do for a living.
CMAs are the best source because they provide comparisons in value between your home and other homes. These comparisons, or “comps” should include:
Homes that are like yours
This includes similarities like style, age and size. If a lot of homes make a good match, then less obvious characteristics are used, such as lot size, upgrades and amenities. This makes for valid apple-to-apple comparisons.
Homes that are in close proximity to yours
The location of a home has a tremendous influence on its value. Homes that are physically close to yours are used. They are almost always within a few blocks of rather homogeneous houses. The exception to this is when a home is somewhat unique (such as a log home or contemporary) and similar homes cannot be found in close proximity.
Homes that are sold or are on the market
It is imperative that comparisons are made with houses that are recently sold. This gives an indication as to the direction of upcoming selling prices.
When a CMA is presented, homes "active" (currently for sale) are used for asking pricing comparisons and consideration. Note: considerably less weight should be given to these houses that have not sold.
The comparison criteria (similarity, location and recently sold) is demanded by lenders when appraisers create them for a loan.
Why You Should Get a CMA:
In the first place, it’s free
Just about every real estate agent will do this for no cost, making it hard for other agents to charge for this service.
Agents are happy to do a free CMA
This includes owners intending to sell on their own. Agents know that the majority of owners give up too quickly and will list with an agent. The agent that the owner lists with is almost always one of the agents who gave them a CMA.
It's an interview opportunity
If you decide to list your home, you will have this opportunity to see if the agent is a person you feel you could work with or if this is an individual who lacks experience, is pushy or not sincere.
During an agent's presentation you’ll hear recommendations on making your home more marketable, how the local housing market is performing and what is needed to complete a sales transaction.
Always, and I mean always, invite in at least three agents to do a CMA. Four or five is better. It gives the agents a chance to be interviewed and get hired.
How CMAs Stacks up to an Appraisal:
Local, experienced agents provide a more realistic opinion of value (in terms of what someone will pay for a property) than values supplied by an appraiser.
Appraisers lack local specialization
Appraisers are almost always less familiar with a particular neighborhood’s value or the factors and trends that affect local pricing than are real estate agents who concentrate in that area. Appraisers cover huge geographical areas. Rarely have the appraisers actually been in the comparison houses, making them much less attuned to the subtle differences between properties that account for why buyers pay thousands (even tens of thousands) of dollars more for one property versus another that are sometimes located just a block away.
The appraiser is more objective than an agent. He or she is not swayed with a potential commission. The appraiser is not trying to impress an owner by providing an inflated value.
Appraisers do not use unsold houses (those still active on the market) as comps when arriving at a property's value.
Then why don't lenders use agents to do the appraisal? Appraisers use standard forms and basically they all use the same criteria for arriving at the value of a property. Agents use similar comparison properties but also rely heavily on their experience and most importantly, the marketability of a property.
Appraisers however do make mistakes and these can lead to killing a deal. Find out more in the CLOSE section, under Appraisers.