Home Evaluations

The value of a home is typically determined by recent home sales of similar homes in the same area. That’s not to say that a similar home can’t sell for more or less. Each seller and buyer enter the real estate market faced with different challenges. A pending foreclosure, divorce, expiration of a lease, multiple offers on the same home, or relocation are some occasions that could influence the sale price of a home.

The definition of fair market vale is “The highest price estimated in terms of money which the property will bring when exposed for sale in the open market by a willing seller allowing time to find a willing buyer, neither buyer or seller acting under compulsion, both having full knowledge of all the uses to which the property is adapted and for which the property is capable of being used”. So long as there are no extenuating circumstances involved in the recent area sales these comparable sales can be used in the comparison. This type of valuation is known as the Comparable Market Analysis.

Homes of similar size and age should be used in this approach since a home with more square footage could have a substantially higher price based on square footage. Example: Two homes sell for $150,000 one home is 2000 square feet, the other home is 2089 square feet. Theoretically, with all other features the same the larger home could sell for $6675.00 more for the additional 89 square feet. Another method of valuating homes is the Replacement Cost Approach. This approach to property valuation is seldom used since most areas of all major cities provide an adequate supply of comparable homes.

When an area has no similar homes sales or the home in question is Historical or Monumental in nature then this approach can be used. This approach to valuation can take a very long time to complete since estimates to rebuild the home back to it’s original state could require custom or even hand made materials and craftsmanship. Remember, any market analysis or appraisal regardless of the comparable homes used or the person performing the valuation is an Opinion of Value. How the market data is extrapolated and adjusted could have a profound influence on the list or sale price.