Property value estimating

Real estate agents are trained to prepare comparative market analysis (or CMA) to estimate a property’s value. A CMA estimate is not an appraisal. A property appraisal is a formal and unbiased value prepared by a licensed professional (called “appraiser”). An appraisal is often required by lenders to ensure the property is worth at least the value of the loan. As a seller, you might think you don’t need to worry about an appraisal. Actually you do.

When the buyer is asking the bank for a loan to buy your property, the bank is going to require the appraised value of the property (“collateral”) is equal to or higher than the loan price. If the appraised value is lower than the loan price, then, there are four possible outcomes 1) the buyer comes up with the difference between the loan price and purchase price, 2) the seller reduces the sale price, 3) a combination of 1 and 2, 3) or the transaction is cancelled (the purchase/sale contract rescinded).

Even when a buyer is paying cash (meaning without lending from a bank), the buyer may still assist on an appraisal. This is to say the property you want to sell must appraise at least the value of the appraised value.

So an appraisal happens once the “contract” between the buyer and seller is signed. A CMA, on the other hand, happens before there is a sale (or purchase) contract. If a seller is interested in knowing an informal value opinion of the property, the seller should consult a real estate agent. To build a CMA estimate, agents gather certain data points about the subject property. Here is a quick summary of those data points (but not limited to):

• Subject build year - subject property age is considered in estimating home value.
• Subject property location – a property in a highly desirable neighborhood is likely to be worth more than a similar property in a less desirable neighborhood.
• Subject property condition – a property in poor condition is likely to be valued less than a property in superior condition.
• Number of bedrooms available in the subject property – in general a property with more bedrooms is likely to be valued more.
• Number of bathrooms available in the subject property – in general a property with more full bathrooms is likely to be valued more.
• Subject property type – a home style (townhouse, ranch, split-level, two-story, etc.) is also considered in estimating home value.
• Subject property construction type – the exterior and interior materials used in building the house are also considered to estimate the home value.
• Subject property square footage – property size dictates its value.
• Subject property lot size – if a house is sitting on a large lot, then it’s likely to be worth more than a house sitting on small lot. A larger lot may leave room for future expansion on/to the property.
• Garage – a house with attached garage is worth more than a property with detached or no garage.
• Basement – a house with finished basement is worth more than a property with a partially-finished or no basement.
• Special features – a house with a pool, fireplace, recreation room, etc. is likely to be worth more than a property without these offerings.

As an owner of the property, you may have specific property knowledge (i.e., upgrades, damages, or concerns) and be sure to share that with your real estate agent to get a more accurate value estimation of the property.

If your property is located in Maryland, please contact me today for an evaluation!