A Comparative Market Analysis
December 28th, 2007 Categories: Selling
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Salt Lake Comparative Market Analysis
How is the value of a home determined? This is great question that has more than one answer.
Home Values from a Buyer’s Point of View
From the buyer’s perspective it is supply and demand. They comparison shop, they will look at all the homes in their area and price.
They will compare the price along with the features and benefits that are associated with the property. Things like area, square footage, number of bathrooms, garage, condition…
As you can see the example in the table below, it is that simple. The property that offers the most features and benefits for the best price is the one that has the most value to a buyer.
Table 1.1
|
Item |
Prop # 1 |
Prop # 2 |
Prop # 3 |
| List Price | $200,000 | $200,000 | $190,000 |
| Area | Similar | Similar | Similar |
| Sq Ft | 2,350 | 2,300 | 2,450 |
| Bedrooms | 3 | 3 | 4 |
| Baths | 2 | 2 | 2.5 |
| Gar | 2 | 2 | 2 |
| Condition | Fair | Fair | Remodeled Kitchen |
Things Don’t Have an Affect on Value
What you paid
What you owe
What you want
What you need
Home Values from the Bank’s Point of View
Banks use appraisers to determine value. Appraisers use a comparative method, but they go by past history instead of the active listings. The bank is looking for a justification that the property is worth x amount of dollars. Appraisers aren’t really looking for a value as much as they are justifying a purchase price.
Now let’s look at the table below and we will use the same information except we use it as recent sold properties.
Table 1.2
|
Item |
Prop # 1 |
Prop # 2 |
Prop # 3 |
| Sold Price | $200,000 | $200,000 | $190,000 |
| Area | Similar | Similar | Similar |
| Sq Ft | 2,350 | 2,300 | 2,450 |
| Bedrooms | 3 | 3 | 4 |
| Baths | 2 | 2 | 2.5 |
| Gar | 2 | 2 | 2 |
| Condition | Fair | Fair | Remodeled Kitchen |
Using the table it would be safe to say that a similar property is worth $200,000. So you can see that the two tables have the same info but it depends on the perspective.
Now that we have looked the way banks and buyers looked at value, we have to factor in that this information is fluid and is changing on a daily basis.
Determining the value of a home is not a cut and dry process, it is an art not a science. The national online sites try to capture traffic by offering home values, when the truth be told, the best source is an experienced real estate professional, not someone that just got their license in the last year or two. Someone that has been through the market cycles before and clearly understands what is going on in the local market place.
If you are interested in a FREE list of comparable homes that have sold in your area you will get real info from a local agent that is active in the market.
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