Assessing House Market Value

Assessing house market value is one of the most important skills you’ll need as a real estate agent or a foreclosure agent. The house market value is the price a buyer is willing to pay for a property in its current condition, given that the buyer and seller are not under pressure to act by extraneous circumstances like divorce, career relocation, etc. Learning to assess the house market value of a property is a skill you will learn on the job, but it helps to know the basics.

Factors Affecting House Market Value

There are a number of factors that affect a house market value, such as the following.

• Location – a desirable neighborhood or school district is one of the major influences of a property’s market value
• Supply and demand – this is the number of homes available for sale versus the number of prospective buyers, and how quickly the homes in that area sell
• External characteristics – lot size, house style, curb appeal, home condition, etc.
• Internal characteristics – construction quality, number of rooms, energy efficiency, plumbing, etc.

Using Sales Comparison

Aside from looking at the factors listed above, one of the best ways to determine the house market value is through the sales comparison technique. This is the method used by professionals when they look at residential properties and determine their house market value. The sales comparison technique looks at the recent sales of three properties in the same or a similar neighborhood with a building style, construction, and size similar to the property being appraised. Of course, you need to consider the circumstances of these sales. Perhaps the seller was in a hurry to sell the property, or the buyer paid more because there were others who were interested. Remember that the market value and sales price sometimes differ.

Comparable sales also look at the characteristics similar to the subject property, like style, age, location, and square footage. For instance, an old three bedroom bungalow is not comparable to a new three-bedroom Cape Cod house even if they are located in the same street.

It is almost impossible to find a comparable sale that’s exactly like the subject property. Remember to always make room for allowances. In order for you to reach an estimated house market value, you need to make dollar adjustments for the difference between the subject property and the similar properties that have been sold. Give the most weight to the sales that are closest to the subject property and that were adjusted properly.

Finding Comparable Sales

There are a number of sources for comparable sales, and your first stop should be the local assessor’s office. An assessor’s office keeps detailed information on the sales history of a property, neighborhood, or architectural style. Other assessors can even give you a list of recent sales that you can compare with the assessment roll. If the assessor’s office does not provide enough information, check with your municipality and see if they have this data online. Other sources of comparable sales are local newspapers, private companies (at nominal cost), or a real estate agent.