The Process Of Estimating Property Values
Property values are a moving target. They are important to buyers and sellers because everyone wants to get the best deal possible. Sellers want to get as much money for their investment while buyers do not want to overpay for a home. There are a lot of factors that play a role in property values including the economy, the number of people looking for homes, new home construction, schools, the job market, and more. How do real estate agents estimate the value of a home?
How Much Will Someone Pay For A Home?
The market value of a home is the amount of money someone is willing to pay for that home. This is how real estate agents estimate the value of the home. He or she will usually take a look at similarly priced homes in the area (sometimes in the same neighborhood) to see what those homes are selling for. Then, the price per square foot will be applied to that specific home to calculate its value.
Often, real estate agents use the past six months as a guideline; however, if there has not been much action, agents might go back further. Agents will usually draw a radius of one mile to ensure homes are similar; however, some homes, such as luxury homes, are harder to compare.
A Professional Appraiser Is Usually Involved
Sometimes, home values are calculated by a professional appraiser who is typically hired by a lender. Lenders want to make sure they will get their money back if the home sells in the future. If the buyer is paying more than the appraiser says it is worth, then the lender might ask the buyer to put more money down before financing it.
Real Estate Agents Could Ask For More Information
Real estate agents might also ask homeowners for more information. If one house stands out on the comps sheet, the agent might ask the homeowner what happened. What makes this house different? Is the location different? Did the home sell as furnished? All of this is important for helping realtors ensure they are doing the best possible job in guiding their clients in the right direction. Some sales may still require the help of a licensed appraiser.