First it is important to understand the various types of value that one can define for a property. These fall into several categories:
1. Replacement value
2. Investment value
3. Market value
Each of these valuations serve a purpose. For example, one would use replacement value for insurance valuations. If you were purchasing property for investment or assessing a real estate portfolio in comparison to other investments then the investment value would be most useful. If you were looking to sell a property or determine the fair market value of your property then a market value assessment would be the most appropriate evaluation to look to.Accredited Appraisers are employed to perform these tasks if you wish to have the valuation documented. These types of appraisals are often required by banks to verify value of property pledged against loans and mortgages. These appraisals also rely on past six months of verified data (often MLS® data) to determine the value of the property.
Most experienced REALTORS® can and will perform a similar evaluation often without the pages of documentation that an appraiser provides and using similar (if not the same) data. REALTORS® are often asked upon to produce a market evaluation as part of their marketing proposals to Sellers. It should be noted that Sellers must be cautious to choose a REALTOR® based on their market evaluation (or to choose the Realtor with the highest opinion of value). It’s pretty easy to see the flaw in this logic, and one theory is that the least experienced or knowledgeable REALTOR® will produce the least accurate (sometimes highest) valuation, so be certain not to fall prey to this trap.
Then how do you find the most objective and accurate market evaluation of your home if you want to discover what your home would sell for in the next week or month? Considering that Appraisers are required to use the past six months of data to determine their final value this can be very accurate in a market that has an abundance of recent similar sales and a market that is relatively unchanged or flat. On the other hand, if the market is increasing or decreasing in value at a high rate then you may find more accuracy with the insight of a REALTOR®. This is because a REALTOR® can help you understand the complex factors and current changes in the market that will contribute to the value of your property in the next month or two looking forward. Also, many times there are other factors that enter into the value of a sale and a Realtor who has insight into the nuances of past sales in their area or expertise will provide a more accurate assessment than an appraiser who is not familiar with these nuances. Add to this the prospect that a REALTOR® may have personally shown or listed many of the past sales and you can get an even greater measure of insight to help you predict the value that your home will achieve on the market.
If you have a REALTOR® that you have used as your trusted adviser, this can be a tremendous asset and an ally in your quest to determine the true value of your home or property. Sano Stante Real Estate offers an expert opinion of value as part of our pre-marketing service at no cost.