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Archive: August 2015


  • Successful Sellers Understand the Value of Proper Pricing Pt. 1

    What Drives Residential Real Estate Value
    Part 1 of 2
    Part 1 – What’s My Home Worth?
    Homeowners – especially those who haven’t been in the market in years – tend to rely upon a number of inadequate resources that fall shy of predicting an accurate value for their homes. Websites such as Zillow can feature useful information regarding a range of values within a marketplace and even offer a glimpse into recent activity within the area, but in the end an accurate approach to valuation requires examining the unique features of the home (location, amenities, and improvements), as perceived and desired by the marketplace (through the eyes of buyers). Unfortunately, as an owner it is usually impossible to remain impartial about the value of your home.
    Sellers Set Prices, Buyers Set Values
    Predicting the likely sale price of a home requires an appraiser or real estate agent to “walk in the shoes of the buyer” and report an objective analysis of value. What drives value? Looking at competing homes and recent sales, the analyst gains awareness of the common attributes recent buyers are looking for in a home:
    • Location – could be about schools, parks, waterfront, cul-de-sac, or even intangibles like side walks, mature trees or unique history of the area.
    • Condition – not simply functional but cosmetic too. A newer roof or water heater is necessary for proper function of the home, but new kitchens and baths, updated floor coverings of exotic woods and tile, modern electrical, heating and plumbing systems all feature heavily amongst the competition in most markets.
    • Utility – family-friendly number of bedrooms and baths, a spa-like master suite, full basement, outdoor living amenities, sufficient garage space.
    • Appeal – exterior style of the dwelling (whether grand or charming), interior decorating, construction material, observable maintenance, attention to landscaping.
    When shopping for homes, these are the features and amenities by which buyers judge the appeal of what’s available. These are often the “must-haves” that represent the “value drivers” of the property. Understanding the impact and therefore the price associated to the value drivers includes an unbiased assessment of the subject home’s conformity – or lack thereof – to the nearby homes that recently sold as well as those currently on the market. Trends are identified that quantify the market price of the features and amenities described above that enable an unbiased expert to establish the amount they contribute to a home’s value, measured through the behavior of buyers.
    By contrast – and counter to the goal of pinpointing the current value of a home – homeowners unfamiliar with the accepted methods to measure market prices instead rely on a number of popular but misguided indicators:
    • Media headlines about a “hot” market and articles about appreciation rates
    • The “Zillow” value
    • Formulae based on average prices in the city, or dollars-per-square-foot
    • The appraised value a “few” years ago, or even longer ago (taste changes)
    • The asking price of friends’ and neighbors’ homes, regardless of differing style, size, location,
    • The base cost of the home plus the money spent over the years on improvements and updates
    These misconceptions tend to blind the typical homeowner from seeing their own home through the eyes of prospective buyers and accurately pricing a home for a successful sale.
    Be on the lookout for part 2, where we will discuss the relationship between cost and value.
    Suzanne Wakefield
    Senior Vice President
    Direct: 312.377.3783
    Toll Free: 888.816.8632

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