Lots of real estate agents and real estate tech companies offer home owners market valuation reports, also called market analysis or comparative market analysis. The reports can be confusing to non-real estate professions so here are some things you should know for how to make sense of property valuation reports.
The basic idea is to find comparable properties and see how they did when they were marketed, as a way of estimating what you should expect your home or property to sell or rent for. A good valuation report should also include information on how long the comparable properties were on the market and for the sold comparables, what was the final sales price compared to original asking price. Comparable properties should be similar as far as condition, size, bedrooms and bathroom count, and location to the “subject” property.
Information on a valuation report is backward looking by nature. In other words, you are looking at what has occurred. This is the best way to get an expectation of what the market will accept for your property. If we find that all sold comps have sold within a few days on market at or above the asking price, then that is a good indication we are in a sellers’ market. Provided the seller does not over ask for the home, then they should reasonably expect a quick sale at or near the asking price.
In preparing a market valuation for selling it is critical to look at all sold, pending sales, and active on the market comparable in the neighborhood. This gives us a full understanding on where the market is at. For instance, if sold comps DOM [days on market] are going up and the current pending and active properties are on the market for longer than the sold comparable, then this is an indication of a “slowing” market.
If you are considering options with the home, such as renting vs selling, then a good report should also show a reasonable forecast for future market value. This report will also give an estimated rental price and estimated sales price. Obtaining this information can help determine if now is the right time to “cash out” or if the property has potential as an income producing investment and/or as an appreciating asset. In some cases, it may take more than one report to evaluate all the information regarding selling vs renting.
Many valuations offered are computer generated reports. Zillow and other sites like it offer these computerized reports. While they can sometimes be very accurate they can also lack the ability to take some neighborhood information into consideration. An experienced real estate professional should be able to provide a more accurate assessment as they are able to take things like, condition and location into account with more specificity.
If you have questions regarding valuation reports or option of selling or renting your property, please contact us.