How to Value a Sacramento Home

How real estate is valued?

How real estate is valued is determined by these four essentials of real estate value. The four basics of real estate value are utility, scarcity, demand, and transferability. These four value aspects are the fundamentals of real estate. They are how all real estate establishes it value.

What is the utility of the property?

The utility of the property refers to its usefulness. The more useful a property is, the greater its potential value. Utility can be general like a standard house or specialized like a purpose built structure. The advantage of a building with strong utility is greater value. Deficiencies in a home’s utility lessens it’s value.

How is scarcity defined in real estate?

Scarcity’s common meaning is lack of quantity. The same thought in real estate is a supply and demand concept. Insufficient supply of homes puts pressure to higher prices. An oversupply of houses drives the price down. But this concept does need to be taken in the context of the whole economy and other factors that change this basic supply and demand equations.

What are the real estate demand features?

Demand refers to the desire to own real estate, coupled with the financial ability to buy. If there is heavy demand, the price should rise or be worth more. The heart of real estate value is the supply and demand equation. But as we’ve seen in the last few years and in other boom and bust cycles, the equation needs to be tweaked to take in the full value situation.

What is the transferability of real estate?

Transferability refers to the ability to transfer ownership of the property. This is a complicated subject. But for the purpose of this blog adding transferability into the equation of real estate value will help in understanding the need for clear title. If you can’t transfer the title of the property into your name how much is that worth? If the whole building needs to be torn down before the ownership can change, how does that impact the value?

Mixing the four basic ingredients of Home Value together creates the real estate value. Other factors can and do have an impact on the value.  But understanding the interplay of the four elements of utility, scarcity, demand, and transferability will yield the basis of property value.

Coffee Real Estate works with the great team of title experts to make sure of the transferability of your new home. In California we have many unique laws that can make this an issue.

How is a Home Valued?

The key determiner of a home value is comparable house sales. The more exact match of the comparable properties to the subject property will yield the best home value assessment.  

A Professionally done Comparative Market Analysis can establish the property’s value.

What is a Comparative Market Analysis or CMA?

A Comparative Market Analysis or CMA is an evaluation of a home’s value based on similar, recently sold homes in the same neighborhood. A CMA is a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area. For example an Elk Grove house is best compared to another Elk Grove property.

A comparative market analysis is used determine the value of a house to price to sell or understand the value to purchase the home. The value of a house (or condo, or co-op, or townhouse) fluctuates often, based on many situations, such as an ever-changing market condition, the condition of the home, and the costs associated with owning it.

What is the process of doing a CMA?

Real estate professionals will also pull comparable homes sold in the local area. The comparables are the houses’ specifics like the size of the home like square feet, and the numbers of bedrooms and bathrooms. Other features of the property are also looked at like kitchen, living room, family room, size and type of garage, size of the lot, age of the building, style of house, and the key factor of location. An important feature is if the house has been updated lately and if the property is in poor or good repair.

With enough comps, the agent will determine the Comparative Market Analysis to establish the property value. The CMA process looks at all this data to come to a conclusion about the value of the home. Specialty properties like care home or assisted living facilities need more data to do a good CMA.

5 advanced Comparative Market Analysis information to make the CMA price better.

Many people think that sale price is the only factor when you’re looking at comparables and trying to set a listing price or asking price. But it’s actually a bit more complicated. Here are five advanced data points that improve the quality of comparables or comps that are general not considered.

1. New construction nearby: Because of low prices for lots and varying prices in home building materials, new homes can actually be cheaper and cost less per square foot than existing homes. If there’s a lot of new construction nearby, that can affect the price for your own listing.
2. Renovations: Recently renovated homes typically sell for more than homes that haven’t been updated in a while. If you’ve recently upgraded your home—especially sought-after upgrades like the kitchen or master bath—your home should be priced appropriately.
3. Developable lots: Not all lots are created equal. Even if the square acreage is the same, a lot that’s easily developable will get a better price than a hilly or rocky lot that needs a lot of preparation.
4. Listing price vs. sale price: Whether sellers actually get their asking price depends greatly on the market. When you’re pricing your home, it’s important to look at sales prices, not just listing prices. The listing price doesn’t always accurately reflect what a home will sell for.
5. Location: Nearby amenities, safety, schools, and noise levels can vary greatly within a neighborhood. Homes in more desirable parts of the neighborhood will sell for a higher price, all else being equal.

Setting the home price can be the hardest part about selling.  Set the price right and the property sells. Set the price wrong and the home may not sell at all. Price is the single most important factor for many buyers to consider first. These five comparable issues are an important factor in setting a listing price.

Coffee Real Estate will go beyond the standard Comparative Market Analysis or CMA and establish the best marketing listing price for your property. This process will establish the best selling price along with your goals to set the listing price.

The CMA uses the real estate value system to evaluate the property

The four important elements of Real Estate Value must be present to create the value of the property.  The four parts or elements of real estate value that must be present are utility, scarcity, demand, and transferability. Adding the four basic ingredients of Real Estate Value together creates the real estate value.

You can have a personal Comparative Market Analysis also. We will need some basic information and a real estate professional will personally create a Comparative Market Analysis for you.

What is the difference between a home price and value?

The home price relates to the actual number of dollars or sold price when it is sold. Price is therefore a fact and not a theoretical concept. Home can be sold for a top dollar cash price.

The home value relates to the worth of a house a person or system estimates. This is more of a theoretical concept rather than an actual fact. The value would be an estimate. Read more here on the best way to sell your property.

What is the market value of a house?

The Market Value of a house means the most probable price which a property should bring in a competitive and open market. The market is understood to be a fair sale between the buyer and seller. The local Sacramento real estate market is a very strong single family home opportunities.

The last step in establishing a market value price is to review all facts and data of the comparable properties and local real estate market data.

The process for a market value considers and evaluates these three elements.

1. Marketing value opinion and reliability of the data collected on the comparable properties

2. Relevance and similarities of each comparable to the subject

3. Consistent use of criteria for all comparable properties

Coffee Real Estate broker prepares BPO (Broker Price Opinion) for lenders and other professional clients. A BPO is a market value and not an appraisal. Our understanding of the value factors or real estate is at a high level. We use this knowledge to help our home buying clients understand how to value the home they are interested in buying. 

Our real estate broker/investor will evaluate your property to find the best selling price.

What is the median home price?

One of the best ways to evaluate a local real estate market is to use the median home price. The median price can be compared to various periods to find a trend. It can be compared against the prior month, quarter, year, and other periods.

How is the median home price determined?

Median is defined as the middle number in a sorted list of numbers. Another way of defining median is a mathematical result that indicates that one half of the group is higher and one half lower. The median price of 101 sold homes would be that price of the 51 home. This would show 50 of the home prices are lower and that 50 are higher than the median price. If there is an even number of total sales, the middle two numbers are averaged to get the median.

The median home price versus average home price

One big problem with the median home price is that it is often confused with the average home price. They can be quite different for the same group of home prices. For example, if the sold properties are very evenly distributed, the median and average might be very alike. However, if the homes sold were weighted more to one high end then the median and average could be quite different. This is why the median price can give a clearer picture of the local real estate market.

The median is used in real estate to hedge against wide variations in purchase price that may skew the average. The average is sometimes called the mean price.  The median price is used to show a better middle ground for the overall market.