What is Your Home Worth?

By March 17, 2012 SELL
Two-storey infill home with attached garage in Westmount, Edmonton

When people get set to sell their homes, they often start thinking about the price they want to list their home for based on how much money they want or need to get out of the sale. Here’s something many sellers just don’t get: What you want or need to sell your home for is irrelevant. The market determines selling prices, but how is a fair asking price determined? Read on to find out. (Or, if you live in the Edmonton area, contact me for a professional evaluation.)

Your Property Assessment

What you want or need to sell your home for is irrelevant

The City of Edmonton assesses property values every year. Anyone can look up a property value on the City of Edmonton website to find out how much their property was assessed for. Please bear in mind, however, that this is only an estimate, and that many important factors could not possibly be taken into account. After all, this is a huge assessment that includes all the homes in the city. Often, the City will under-estimate prices one year, and over-estimate them another to make up for the loss in taxes. The assessment of your property is at best a rough estimate as no one has even visited the home to check on it’s condition, renovations or anything else that might set it apart from the neighbouring homes. For examples on property assessments by the City, see How Accurate is the City of Edmonton Property Assessment?)

Local Property Values

Your property’s current value can best be estimated based on recent home sales in your specific area

Your property’s current value can best be estimated based on recent home sales in your specific area. Because these homes are in your neighbourhood or zone, they take into account the location of your property, which is the single most important factor in determining how much it’s worth.

But contrary to popular belief, you can’t just use listings to determine what homes in your area are selling for. After all, depending on market conditions, homes will often sell for more or less than list price. There are only a few places that make this information available, so it can be hard for owners to get enough information on any one area or type of home. But it’s important to know that asking prices, or list prices, are essentially useless because many houses do not sell at all, while most houses sell for a price that differs significantly from the list price.

That said, this method of determining a home’s market value isn’t foolproof. Issues can occur when there have been few sales in your area, or if your home differs from the other homes in your neighbourhood. In that case, the search for similar homes will have to include adjacent neighbourhoods as well. The size of the sample you have to look at makes a difference in how accurately you can determine your home’s price. That’s why it’s much easier to obtain accurate selling prices in the city than in rural areas, which may have few or no equivalent adjacent properties to use as a comparison.

The Competition in Your Neighbourhood

If you want to sell, you might have competition. The number of homes for sale in your area – or even in Edmonton in general – will affect how much money you get for your property. This is the simple law of supply and demand: More homes to choose from means more competition, which can drive prices down.

A common example of competition at work can be seen in a condominium that has many units for sale. Condo units share a lot of common factors and are very comparable to each other. If there are many units for sale at one time, the selling prices will usually decrease. After all, why would a buyer pay more for one unit when he or she can get a similar one in the same location for less?

The same thing can happen when one neighbourhood or block has many houses for sale at one time. There may not be anything wrong with the area, but buyers have more to choose from and sellers will likely cut prices to out-compete each other.

The Demand for Homes

You can’t just use listings to determine what homes in your area are selling for

But the number of homes for sale only accounts for one side of the equation. The other thing that influences home prices is how many people are looking to buy. If there aren’t many people looking for homes at the time you’re selling, you won’t have much demand for your home. There could be more demand because prices are moving more new homebuyers into the market, or, as we’ve seen in Alberta in recent years, an economic boom brings new people into the area. Whatever the reason, the more buyers there are, the higher home prices are likely to be. You can get a sense of how much demand there is for homes in your area by checking out the absorption rate (link this).

Unique Characteristics of Your Home

Do you live on a busy road? Do you have an oversized garage? Has your house been customized for you, or is it a good fit for almost anyone? Is your home’s layout currently in style, or is it undesirable right now? These factors show the need to adjust any price gathered from selling prices. No two houses are alike, so there is often a need to modify the asking price to suit your home’s amenities and drawbacks. So, just like you have to look at what makes your home similar to the others in your area, you also have to look at how it’s different – both in a positive and a negative sense. If it has more and better features than other homes around it, it may command more. If it has fewer desirable features, it may command less.

The No. 1 Way to Determine the Value of Your Home

There’s only one way to know the exact market value of your home, and that’s to sell it. In reality, only the market can determine true value, so anything you or your REALTOR® comes up with is really an evaluation to make sure it sells in a reasonable amount of time. No one knows what something will actually sell for on the open market until a deal is made.

Few houses sell for the asking price – they may sell for more or less, but perfect pricing is rare. There are just too many factors at play when it comes to the Edmonton real estate market – or any other market for that matter (that’s why economists so often disagree!). The closer the estimate or evaluation is to the actual value is still a very important factor, however.

If a home’s list price is too high, the house may not sell for many months, if it sells at all. If the price is too low, a seller could lose money on a sale. That’s why I always recommend professional assistance when selling your home. (For more information on some of the pitfalls of selling your home, see The 5 Biggest Mistakes Home Sellers Make.)


 

by +Alan F Macdonald REALTOR® | Copyright © – gimme-shelter.com

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Alan F Macdonald

Author Alan F Macdonald

Alan F Macdonald is a real estate agent with Maxwell Challenge Realty in Edmonton, Alberta.

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