How do you determine the value of your home?
It may sound overly simplistic but a home is simply worth what someone will pay for it. What someone will pay for a property in a competitive and open market is known as the market value. There are three main valuation methods. The differences and uses of these methods are outlined below:
1) CMA or Comparative Market Analysis: Typically this method is used by a Realtor© to determine the probable selling price of a property. The CMA derives a range of prices that the subject property should sell for by analyzing other comparative properties or ‘comps’ that sold in the area and then making price adjustments for the differences between the comps and the subject property. CMAs must be prepared by a licensed real estate agent, broker or appraiser.
2) AVM or Automated Valuation Model: This is a model based approach for determining the price of a property based on available market data such as square footage, last sales price, tax assessments etc. The most well known AVM is Zillow’s Zestimate. One of the limiting factors of a model based approach is the inability of a model to discern upgrades or lack thereof and therefore it doesn’t always present an accurate valuation of the property.
3) Appraisal: The process of determining an opinion of value and generally used to determine collateral in a real estate transaction is known as an appraisal. It is used for the majority of purchase money transactions involving a loan. Appraisals are required for most federally related transactions above $250,000. Appraisals must be prepared by a licensed or certified appraiser.
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For more information, contact:
Coldwell Banker Residential Brokerage
211 South Street
Morristown, NJ 07960
(O) 973-267-8990 x153