The Real Estate Market is a wild and wonderful creature that agents follow around every day, until the moment when a client asks "what's my property worth?". Time stands still, we wrestle that wild creature to the ground, and pound the details out of it. This beautiful dance is better known as a "Comparative Market Analysis", and its purpose is to build a context around a specific property, based on recent sales of similar properties, to determine the market value. This exercise is the first step in listing a property for sale. At Sandpiper Realty, there is a stringent set of property data that we are required to collect in order to complete a CMA. After the CMA comes the listing price, which is obviously higher than the property's market value. How much higher, will depend on what the current available inventory (the competition) is priced at and what that inventory looks like. We over-do it on the front end, because this data set will be the foundation of the listing when the time comes to bring the property to the market.
After a site visit to your property, which we call the "subject property", and gathering all the property data, we pull the recent sales of similar homes in the area.
The comparison criteria we use includes but is not limited to:
- Bedroom/Bath Count
- ELA (Effective Living Area)
- Lot Size (Acreage)
- Age and Condition of home
- Presence of features like Guest House, Deck, Air Conditioning, Dock, Private Beach Access, Deeded Beach Access
The properties that make up this sales data are "comps". We then sift through all of these details, comparing the price and features of the sold comps with the features at the subject property, which leads us to the market value. That is what the property is worth. Some real estate markets in high density locations may have a standard price-per-square foot that can be applied to generate a property's market value. Martha's Vineyard is not one of those places. Martha's Vineyard properties vary immensely, so having an agent who is familiar with the comps in your neighborhood is the best route to get the true market value.
The Listing Price
To set a listing price, we look at the current available inventory, which will be the subject property's competition. Using the same process as the CMA, we see where the subject property lies in the spectrum of current listings based on its features. There are also a few less tangible qualities that affect the listing price. For instance, having a fully booked rental calendar very early in the year or being in a micro-area that has not had a sale in a very long time. The subject property should be listed at a price that reflects its true market value, and also compares well to the competing listings on the market.
Listing Too High
Setting a listing price that's too high means that the property may sit on the market for several years and become "stale". The goal of listing your home for sale is to sell it. If you have to "net" amount that you want to make with the sale of your home, and your agent has told you that the market value is less than this price, you are faced with two choices:
- List high, get negative buyer feedback and potentially low offers, and reduce the price.
- Wait, follow the monthly market report to watch the sales patterns and choose a time when conditions are the most favorable to sell your home at the best price.
When analyzing the comps for the CMA we always look at the ratio of listing price to selling price, to find a pattern. If the surrounding properties all sold for 86% of their listing price, don't aim for a goal of 140%. Buyers are savvy, they know the comps too, because that's what they will be using to generate an offer price for your property.
Many homeowners ask two or more agents to give them a valuation of their home's worth, and a price at which they are comfortable listing it. There are agents who will intentionally give an inflated listing price, in order to "get the listing". It's imperative that an agent show you the sales data that they used to generate a listing price for your home.
Zillow is a company that attracts users in order to sell advertising space to vendors who are selling products to those users. Zillow is not in the business of actually selling your home. Zillow directly recommends that users supplement their property's Zestimate with information from a real estate agent or an appraiser.
The Zestimate® home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value. The Zestimate is calculated from public and user submitted data; your real estate agent or appraiser physically inspects the home and takes special features, location, and market conditions into account. We encourage buyers, sellers, and homeowners to supplement Zillow's information by doing other research such as:
- Getting a comparative market analysis (CMA) from a real estate agent
- Getting an appraisal from a professional appraiser
- Visiting the house (whenever possible)
An 'assessor' is a specialist who calculates the value of property. The value calculated by the assessor is then used as the basis for determining the amounts to be paid or assessed for tax or insurance purposes.
The town evaluates the criteria it uses to calculate assessments once every three years, per the Massachusetts Department of Revenue (link to MVTimes article). Your assessment may change on a year to year basis, when the town updates their assessments based on their calculation criteria which includes sales data, rental data, and construction costs. They may not actually visit and see the inside of each house, but they apply the calculation methods to the property. They will do a site visit when a building permit is completed, and sometimes when there is a sale, but not typically. There is always a pattern when we look at sale prices vs. assessments in a particular area. This ratio is unique to very localized areas, and can't be applied to a whole town. The assessors office values the property for tax purposes, they are not making a market valuation. So the pattern that we find from the ratio of sale price to assessed value, shows a ballpark of what houses are selling at in an area. However this ratio is not specific enough to apply to a property to generate it's market value or a listing price.
What are the steps to determining the value of my home?
1. Get a CMA from your agent
2. Ask your agent to show you the comps and discuss the sales data
How to set a listing price?
Ask your agent what the pattern of listing price/sale price shows for the comps in your CMA. Make sure your listing price syncs up with the sold comps' ratios, and with the current available inventory (your competition).