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How are market value, appraised price, sale price different (Ask the Realtor)

How are market value, appraised price different, sale price (Ask the Realtor)
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Intro: In last week's column, Boise Realtor, Jace Stolfo explained what it means when a home's market value, sale price and appraisal price turn out to be different. If you're like me, however, you may still not know what to do with this information. If you have a home for sale on the Boise real estate market or are looking to buy one, the following information may help to clarify your thinking. However, as always, contact a Realtor in your area (if you live outside of the Treasure Valley) to get the best advice as it pertains to you and your situation.

Ask the Realtor:

How do you use this information -- market value, sales price, and appraised value -- to determine what you're asking for your home when you're trying to sell it? And what are some strategies that you can use to sell your home if that's your goal?

Jace Says:

When I'm thinking about listing a property or meeting with a seller to list a property, what we're really looking at is what is the market value? More specifically, I want to know is what is the range of values that this home may bring in the marketplace? And where would the sellers want to price their home given their goals and time frame that they're working with?

So What are Some Things my Boise Real Estate Agent May Say?

For example, maybe they choose to list it on the more aggressive side of the sale, because they don't want to have the home on the market for months and deal with lots and lots of showings. They want to price it to sell and get it moving more quickly.

Other sellers may choose to price it on the higher end of the spectrum, knowing that they may not reach that value, but want to give it a shot and maybe would consider price adjustments if the market ends up not bearing that price.

So when it comes to using market information to determine a marketing value for real estate in Boise, what real estate agents are going to do is called a comparative market analysis, which is often referred to as a CMA. And what the CMA is going to do is look at primarily sold properties, recently sold properties as well as homes that are currently "sale pending" and perhaps also active homes currently on the market.

I'm Doing My Real Estate Market Research: This Means What?

But of those three types of sales or comparables, the sold homes are usually the most important. And so what the agent is going to do is look at the most recent sales for homes that are comparable.

Now, when it comes to looking at comparables, there's both an art to it as well as a science. There's science in the sense that your Boise, Idaho real estate agent is going to try to find sales that are in the same neighborhood, similar age of home, similar size, same number of bedrooms, baths, etc.

But there's also some art to it, because no home is typically identical to another, so the agent is going to have to make adjustments for "well this home has a fireplace, the other one didn't" or "this one had a two car garage and the subject property has a three car garage." For each of those variances, a dollar amount can be assigned to it and adjusted for. Additionally, the condition of the home is another factor that has to be adjusted for as do upgrades and other factors.

So looking at the sold comparable properties is the best source of information, because that really shows you what buyers are willing to pay for a similar type of property.

What Else Will my Boise Realtor Look At?

Now, it also depends on how fast the market is changing. If homes are rapidly appreciating or depreciating, you really need to look at the pending and active properties, too, because those are the most up-to-date information.

Even if you're looking at past sales as is the usual way of doing this, if prices have been dropping and there's a home down the street or around the corner that's priced lower than what the active/ sold homes are reflecting, then you have to know about that. That Boise home for sale is going to be your current competition.

As you can see, an agent is going to look at sold, pending and active history to really get the most complete information. An agent is not necessarily going to look at a past appraisal. As I mentioned, an appraisal is simply one person's opinion of value, and if that appraisal was done a year ago, it's really outdated information.

Your Boise real estate agent is really going to want to try to find activity within the last several months, maybe even up to six months, depending on how much data there is to choose from. But that is longer than what he/she'd like to draw from. If he/she can find sales within the last one to three months, that's generally ideal.

More About Ask the Realtor

**Author's note: Because this is the Boise Interior Decorating column, Jace speaks to the local audience throughout this column. However, this is also good general advice in terms of educating you about the thought process your Realtor will use as he/ she evaluates your home for sale. That said, if you live outside of the Boise real estate market or outside the Treasure Valley, your own local real estate agent can give you the most pertinent information as it applies to your situation.

Jace Stolfo is an associate broker and Realtor in the City of Trees. His company, Boise Real Estate Plus, LLC with Keller Williams Boise helps connect buyers and sellers in the local real estate market. He has been named a Gold or Platinum Level Top Producer for the area for the years spanning 2009 to 2013. If you need more information about the Idaho real estate market, contact Jace.

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