Properly evaluating homes in Santa Cruz can be tough work. Improperly evaluating properties is easy, and can be done in less than a minute on the web. As many sellers may suspect, there is a difference from the quality of a valuation you can get automatically from the web, and the type of evaluation that is provided by an experienced, local real estate agent. Here we’ll explore Holistic Valuation of Santa Cruz Real Estate, and discuss some of the additional things to consider when determining the value of a home.
Your run-of-the-mill property valuation website uses a computer algorithm that works to estimate a home’s value. After sending in a valuation request, this algorithm digs through tax records and sales information, cross-references it using factors such as home size, room counts, lot sizes, and age, then weighs the figure against additional factors such as proximity of the sales activity and time elapse of recent sales vs. local value progression rates. All of these elements are thrown into a formula, and out pops a value. The sophistication of the programming is remarkable, even if the results often aren’t.
So what’s wrong with programming-based valuation models such as these? Well, they are based on information that often times is inaccurate, especially for properties here in Santa Cruz. For instance, sometimes the actual square footage of a home is greater than what is reported on the Assessor’s records, which would throw off calculations. Or perhaps a home was built years ago, but underwent extensive remodeling just recently. A computer program wouldn’t pick up on such things. They also don’t have a way of factoring in other issues such as litigation within an HOA complex, proximity to road noise or even a lovely ocean view. Speaking of value, what is reported in the Assessor’s records will typically include in the reported sale price any extra amount paid back to buyers through credits and other incentives, thereby skewing the true value range in a market area.
A properly prepared home valuation – also known as a CMA, or Comparative Market Analysis – begins with the home itself, including its true dimensions and functional utility, its condition, and any amenities or upgrades that will affect value, taking into particular consideration the immediate location. What is the street like? Is it easy to get in and out of the driveway? What are the sights and sounds associated with living right there? Once this has been established, then the search for comparable properties can begin.
Finding the right comparable properties is about more than just looking for homes that are similar in size and age. An appraiser will make value adjustments based on anything from a home’s size, age, and even amenities and condition. Yet in order to find comparable properties that provide a similar living experience, an agent’s intuition and experience provides an invaluable edge over even the most sophisticated computer system. All of the pertinent information is brought together, and coupled with an understanding of the immediate and surrounding market area is used to find the comparable properties that best represent the local market and value range of the seller’s home.
Now comes the fun part. The evaluator must dig deep not only into the subject property, but into the life and sales history of each of the comparables, learning how they differ with respect to the subject and making the necessary adjustments along the way. Any differences for things like flooring type, condition of paint, and how well developed and tended is the landscaping are considered, and values inch up and down accordingly. Agents also take into account factors such as how long ago the home sold, and what were the motivating factors behind the sale. A property that is priced under market in and sells quickly needs to be adjusted to compensate, as does the property that is listed for top dollar and spends months sitting forlornly on the market. After all of these calculations are complete, the adjusted value of each comparable becomes a true reflection of the subject property itself.
Many agents stop here and pass along to sellers the value or value range that they have determined through what has been a fairly complicated process. Yet the best real estate professionals go above-and-beyond to give this value range a bit of context.
It isn’t enough to say that a market is in decline or booming, and then tweak a home’s value estimate corresponding with the rate at which values for other homes have changed. A full-service evaluation considers additional economic dynamics (such as employment and interest rates), and makes focused value adjustments to the estimated value based on these, as well as other factors, including:
- What time of the year is the property to be sold? Which buyer demographics are most active during this time of the year? Will the subject property appeal to these buyers?
- Are credits or incentives typical for the buyer pool most interested in homes like the subject? Should the home be priced with consideration given to buyers possibly requesting credits or incentives?
- Does the subject property’s target buyer pool typically prefer to purchase as-is, or as-repaired? Which improvements or upgrades would be best to complete before listing the property, and how will they affect market value and appeal?
- What type of financing will the subject property qualify for? What type of income level would a buyer need in order to qualify for financing on the subject property?
- Is there any legislation or economic changes in the offing that may impact inventory levels or buyer demand, particularly with regards to short sales and bank-owned foreclosures? How should the subject property be priced and marketed in order to compete effectively in a changing real estate landscape?
As should be clear, there much more involved in accurately determining a home’s market value than a simple mathematical assessment based on location, condition, age, square footage, lot size, bedroom and bathroom count, upgrades and amenities, and quantity and quality of parking. As any appraiser will tell you, there is no set formula for determining how much any of these affect a property’s worth, as the amount of value that the market places on any of these characteristics changes from neighborhood to neighborhood and over time.
After all is said and done, a full-service home evaluation provides sellers not only with an accurate value from which to base their listing strategy, but an understanding and a feeling of all of the additional elements that merit consideration when forming that strategy. When sellers take the time to work with a professional with proven results to develop their game plan, they list with greater confidence, and sell with greater success.
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