Bob: What is the difference between list price, sales price and appraised value? I want a thorough and long answer please. I am thinking about buying a home in Reston Virginia.
Steve Bachman: Bob, the list price is the seller's current advertised price for his property. The price that the seller sets could be at, above or below the property's market value. In a buyer’s market, when prices are flat and/or falling and there's a lot of housing inventory available, you could reasonably expect to offer at or below the market value.
Bob: How does the agent figure out the market value? Can’t we just go with what Zillow says?
Steve Bachman: Bob, the market value of your Reston home of interest should be determined by your agent who will analyze the prices of recently sold comparable properties near that home, using what should be the “net” prices received by the sellers of those homes used for comparison. By “net” price, I mean that any seller’s subsidy or monetary help the buyer receives back from the seller should be subtracted from the published sales price of properties being used for comparison.
For example, if a comparable home sold for a sales price of $350,000 with the seller paying $10,000 of the buyer’s closing costs, the net sales price of that home is $340,000 not $350,000. Your real estate agent should be able to obtain and compile this data for you. It is a major part of her job.
Do not rely on Zillow estimates or the like, they are notoriously prone to error because those folks are not using the most current data and they cannot make adjustments for improperly recorded square footage or condition of the subject properties. In a tight market, every $5,000 makes a huge difference to you as buyer, and in our experience that is the closest that the public national programs can do…. usually they are more prone to error than that.
Bob: I have heard the acronym CMA. What does that mean?
Steve Bachman: It is a home pricing analysis tool that your agent should use to provide you with data you will use to determine your offer price. It stands for Comparative Market Analysis. There is a CMA that most agents can compile from the local MLS in a relatively short period of time. These are very good for getting a “close” approximation of market value to use in comparing your homes of interest.
However,when you get down to writing an offer, if the properties that are being used as comparables are very different in style, lot size and square footage (this is often the case), the standard CMA may not be good enough.
Your agent should have the ability to do a spread sheet analysis using square footage records obtained from the tax records (which are often inaccurate and must be adjusted by experience) as well as provide you with a ratio of sold price to tax assessed value for all the properties being evaluated for comparison with the home you are offering on.
This can take hours for her to prepare since the data does not auto load from the county's tax records and everything needs to be double checked for accuracy. Once this is done, you will then be able to see what homes in the neighborhood have been selling for on a square footage basis as well as see how the net sales price to tax assessed ratio lays out for all the properties used in comparison. With this data at your disposal, you as buyer will be well armed for negotiations.
Bob: Man, that’s a lot to remember.
Steve Bachman: Bob, don’t sweat it…good agents know how to do this. In fact when you interview prospective buyer's agents you may want to ask them to show you some of the spread sheet analyses they have done for previous buyers.
HA! That will sort them out fast, since no amateur or real estate hobbiest will know what you are talking about.
As far as the last part of your original question regarding appraised value…..the appraised value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, condition of the property, square footage and numerous other somewhat “subjective” factors. It is the basis for the mortgage lender’s valuation of the property and determines in large part what they will lend on a particular home.
Bob: That was pretty thorough.
Steve Bachman: Thanks Bob, when you actually see a detailed CMA you will be pleased..they are very cool.
Why pay more and get less when selling your home? Jan and Steve Bachman of RE/MAX Gateway use professional photographers, create interactive photo floor plans, print full color brochures, and make an individual property website for your listing that goes out to 40+ public real estate search sites including Realtor.com, Trulia, Zillow etc.
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