Finding Market Value

First, lets define market value: "The likely price a property should bring in an open, competitive market under conditions favorable to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
I could spend a lot of time breaking down that definition, but I will let you work through it for yourself. The purpose of this post is to help you understand the process I use to arrive at market value.

Here are the 5 steps I use to find market value:

1. Look at the history of the property, the city assessment, the location of the community and location of the property within the community and the lot orientation​. Consider the current market both city wide and within the subject’s community as, in the end, this will all influence the listing price
2. Find comparable properties that have sold, are for sale and have their listing expired. The market value of real estate is established by a real estate agent using what is commonly known as a comparative market analysis. This is a procedure that is exactly as its name describes. The agent compares other properties, listed,  sold and expired, to the subject property and arrives at a market value range.
3. Establish a range of pricing. Every community has a range of pricing and the comparables help to establish that range. I will often look at all properties that have sold in a neighbourhood, not necessarily to use as comparables, but they put a property in context.
4. Subtract and add value to the subject based on features, selling time, location and condition. The value of a home can be affected by many variables and the agent looks at all of those and compares to the subject property. For example, and this is an oversimplification to make the point, If a comparable property has a fire place and the subject does not, a fireplace may decrease the value of the subject by $4000. 
5. Compare the results of the analysis to the range of pricing and establish a value range for the property. The subject property will fit into this range based on the features, condition and location. If a house is substantially renovated or upgraded, it may have a market value at the top of or just above the top of the range.  If a house is in poor condition it may be priced at the lower end of the range. 
   
   

Armed with this information the seller and the agent can work together to decide on the listing price for the house. No agent can tell their client the absolute selling price of a home.  That is determined by the market. The purpose of the Comparative Market Analysis is to establish a range of pricing and advise the seller on what is a most likely outcome for the sale of their property. 

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Jim Perks is a REALTOR in Calgary, Alberta, Canada. He uses his expertise in Internet marketing and real estate experience to service both his buyers and sellers throughout the city of Calgary. He can be reached at RE/MAX Real Estate (Mountain View) 403-247-5178 or by email at [email protected]. His website is www.calgaryrealestateagent.