Market evaluation

presents:

Market Evaluation – Analyzing PropertyMarket Evaluation – Analyzing Property

•CMA•Appraisal•BPO

CMACMA

Comparative Market Analysis• A report that a real estate agent/broker compiles

to assist the seller in determining the proper list price

• The report can also assist the buyer in determining the proper offer price

Be careful when compiling comparables or suggesting a property value

AppraisalAppraisal

• Typically used for:– Taxation purposes– To discover a possible

selling price

• Though a CMA and an appraisal both use comparables, only an appraisal can be used for lending purposes.

Broker Price OpinionBroker Price Opinion

Used to evaluate property value.

Useful to a Lender or Relocation Co. to analyze data in a format they would like.

Not used for Lending purposes

QuestionQuestion

• Can licensed agents be paid for a BPO?– Yes, must be paid through Principal Broker– As long as the BPO is NOT used for lending purposes

• Do NOT collect payment for a BPO for: – Loan Modifications? – Tax Appeals?– Refinancing?

•Loan Modifications •Tax Appeals or•Refinancing

Subject PropertySubject Property

• Gather the specifications of the subject property.– Lot square footage– # of bedrooms– # of bathrooms– Age– Style– Garage– Other amenities

Comparable PropertyComparable Property

• Subject Property

• Comparable Property

Comparable ApproachComparable Approach

• A good comparable is one that is most like the subject property.

• For example:– Within 12 blocks– Similar style– Within sq. foot range– Amenities/Age– Pool, garage, lot size

Comparable ApproachComparable Approach

• How do we value amenities?– Pool– Out buildings– Block walls– Stream bed– Lake/Valley view

• Adjustments– Pool or no pool– Stream or no stream

• Location– Corner Lot– Next to a school or shopping center

Comparables in Changing MarketsComparables in Changing Markets

• Comparables are always sales in past, so they may not always be the best indicator of value by themselves.

• It may be necessary to adjust them by the projected percentage of decline or appreciation.

The Real Estate FactorsThe Real Estate Factors

• How long does it take a property to sell?• Will the property sell?• Consider the following factors:

– Price– Location– Condition– Financing– Market Conditions– Marketing

PricePrice• An agent can make recommendations but the

seller is the only one can put a price on their property

Pricing GridPricing Grid

LocationLocation

• The value and time on the market

has a lot to do with location• Property by nature is scarce, so the most sought

after property holds the highest value

ConditionCondition

• A well maintained property will

draw more buyers• When additional fund must be invested in the

property due to poor maintenance, the value is effected and could limit the number of buyers

Seller may choose to invest monies into improving the property or leave it as is.

ABC News Story- Appraisal Makeover

• Tips for Homeowners to improve an Appraiser’s opinion on value.

• Broadcast on ABC News Sept. 2012

(Click to view video clip)

48 Hour Appraisal Makeover Video Clip

FinancingFinancing

• The more financing options available, the larger the buyer pool.

• Some properties are difficult to finance and may take a unique buyer therefore they may take much longer to sell

• Neither seller nor agent have any

control over this factor

Market ConditionsMarket Conditions

• When the number of homes increases, value decreases and time on the market increases

• Market conditions can vary from one area to another

• Neither seller nor agent have any control over this factor

When the number of homes decreases, value increases and time on the market decrease

Two Types of Markets:

MarketingMarketing

• Advertising an available property is essential to:– Whether or not it sells– How much it sells for– How long it will take to sell

• Reaching a wider pool of buyers will insure the best buyer is found

• The real estate agent has a lot of control over this factor

• It is important to accurately explain to the seller what marketing efforts will be done

FactorsFactors

• Agent should only be responsible for what the agent can control

• Agents only have limited control over the sell process

• Agents have control

over very few factors

Property Tax AssessmentProperty Tax Assessment

• In most places, property is assessed as a way to tax property owners relative to the value of the property

• It’s always a good idea to review the assessor’s evaluation

• Many times the values will be off from actual market value but it’s good to know if the evaluation is in the “ball park”

• Never rely solely on the assessors opinion

Foreclosed/Bank Owned PropertyForeclosed/Bank Owned Property

• These properties typically sell for less than seller owned properties

• If a comparable is a Bank Owned property, this needs to be considered and may require adjusting

Buyer PoolBuyer Pool

• The amount of buyers that are currently willing and able that are looking for a type of property similar to the subject property

• The larger the buyer pool the fewer days a property will be on the market

• What kinds of property have large Buyer Pools?

• What kind of properties have small Buyer Pools?

Days on MarketDays on Market

• Usually this refers to the time between active status on the MLS and the time the property goes under contract

© 2010 Stringham Schools

Percentage of List PricePercentage of List Price

• Concessions?• Original List Price?

$100,000 List Price

$ 95,000 Sold Price$ 90,000 Adjusted Price

$ 85,000 Sold Price

$ 5,000 in Concessions

Price per Square FootPrice per Square Foot

• Simply makes price adjustments by the size of the property.

• It does not take into consideration the quality or effective age of the property.

• Is higher in areas that are most sought after and lower in the least desirable areas.

• Can be more effective way of comparing in new construction properties.

Buyer’s PerspectiveBuyer’s Perspective

• It may help to look at value through the eyes of the buyer.

• Buyers often look at houses of all styles, ages and sizes in areas they like.

• Pay attention to where you are priced and how that relates to how buyers and agents do property searches.

The Stepping Stone ProcessThe Stepping Stone Process

• Buyers typically shop all of the properties that fit their criteria and will select the house that is the best deal.

How Many go Under Contract?

Active Comparables

+ Under Contracts

Total

Total ÷ Under Contracts =

% of homes going

Under Contract monthly

Study the Market ResponseStudy the Market Response

• No matter how great research is, putting a house on the market is the best way of evaluating how real buyers respond.– How many inquiries have there been?– How many initial showings?– How many of these buyers came back for a second

look?

• This information is very valuable to sellers who are trying to make good decisions about price.