property value
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Use an online tool to broadly estimate
a home’s value
Online evaluation tools like Redfin and Zillow can be fun to use and give you a general idea about property value. Please note that it is advised to have a Comperative Market Analysis performed by a local real estate agent to ensure you have the most accurate valueation possible when selling your home.
A Good way to use online tools…
You’re a buyer looking to buy a home in a broad price range and want a map view that will show you the areas where you are most likely to find homes in that range.
Online tools should never be used…
When you’re determining the list price of your home or evaluating offers on your listing.
Learn more about Comparative Market Analysis from this in depth take by Audrey Ference of Realtor.com
Comparative market analysis (CMA) explained
Real estate agents create CMAs by looking at comparables, or comps—recently sold properties that are similar to your own home (or, if you’re a home buyer, the one you want to make an offer on). Similarity is key, since it gets you closest to an apples-to-apples comparison.
Let’s say your own home has three bedrooms, two baths, and is around 2,000 square feet. Your neighbor’s down the block is also a three-bedroom, two-bath house clocking in at 1,950 square feet—and it sold last week for $300,000. Odds are, your place is worth about that same price.
“Comparable homes should be in the same or similar neighborhood, have similar square footage, number of bedrooms, bathrooms, features, and upgrades,” explains Shayan Jalali, a pricing strategy adviser with Berkshire Hathaway HomeServices in Boston.
But since most houses are at least a little bit unique, how identical do they need to be?
Tristan Ahumada, CEO of Lab Coat Agents, says comps should ideally have the same number of bedrooms and bathrooms, be located within a quarter-mile of your home, and within 200 square feet of your home’s size. Whenever possible, they should be in your ZIP code and school district too.
It’s also important to make sure your CMA analyzes recent sales. Markets can change quickly, so Ahumada advises not going back any more than six months.
Another rookie mistake? Looking at listing prices on homes and assuming those are realistic comps. Those numbers may be inflated based on home sellers’ hopes of what they’ll get rather than reality.
“Or, in really competitive markets, agents purposefully underpricing their listings to generate more interest,” says Beatrice de Jong, director of residential listings at Open Listings in Los Angeles.
Bottom line: CMAs should take into account the final sales prices of homes.
The more comps you use, the better you can triangulate a home’s price, but if you have at least three comparable, recently sold properties, you should be able to average out their prices and get a good sense of what a given home is worth.
Why to ask real estate agents for CMAs
Most real estate agents will provide you with a CMA for free, especially if you are selling your home. In fact, comparing CMAs is a great way to find the agent you want to work with. Ahumada encourages potential clients to get market analyses and conduct interviews with at least three different agents before signing with one.
“It will help you really spot the agents who know the area well,” he explains.
According to Ahumada, most agents should be happy to email you a CMA before you even sit down to have a conversation. Consider it a good kickoff to your working relationship and a way to find the right real estate agent (search your options at realtor.com/realestateagents).
Taking condition into consideration
OK, so you’ve found your recently sold comps, and hopefully they match up with the property you’re analyzing. The more nuanced bit is taking things like condition, lot size, extras, and curb appeal into consideration.
“You can’t compare a fixer-upper to something with lots of upgrades,” says de Jong. Ideally, you will be able to find comps in a similar condition to the house you’re trying to price—but if not, be wary of just adding the full cost of your remodeling to a home’s price.
In other words, just because you spent $10,000 installing an in-ground pool does not mean home buyers are willing to pay you $10,000 more. On average, homeowners should expect to make back only about 56% of the money they spend on renovations, and that return on investment varies widely based on what you do (here’s the ROI on 20 popular home improvements).
De Jong also encourages people to try to find comps with a similar home style. In her market, for example, trendy midcentury modern homes bring a higher price.
Some market knowledge is harder to DIY. Every area will have different things that are desirable, and upgrades and extras will be worth more in some areas than others. In California, for example, Ahumada estimates that a high-end kitchen remodel adds between $20,000 and $40,000 to a home’s price. But if you’re doing a CMA for an area where home prices average $150,000, those numbers are going to be much lower.
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