Interpreting a Market Analysis

A market analysis not only helps a Buyer understand what the market value of a home should be, but it can also be used to help determine which home (say, out of 3 excellent choices) is a better investment. Usually there is a discrepancy large enough to make a fair determination as to which home is probably the best priced. That doesn't mean that the home is the best fit for you or your family, but knowing which home is the better value can help a client see past some of the emotional attachments they may have toward a certain home.

In many cases, the #1 home is also the best value. (After all, they have looked at everything else in that price range in the area, and they like that home the best, right?) Still, what if there is a $50,000 price discrepancy between the lowest of the Buyer's top 3 picks and the highest? Obviously, the home that costs $50,000 might be more emotionally appealing because of an extra feature or amenity, or because of the finish level of the home. In this case, the extra $50,000 may be there, or it might not.

Sometimes the top 3 choices are all pretty close to market value. In these cases we suggest that the Buyer  ultimately decides on the home that best meets their needs.

The most common questions about a home's Market Analysis have to do with understanding the analysis.

Here is a brief explanation of the Analysis we provide:

1. The analysis usually looks at homes in the same general area that have sold within the last 0-180 days. It attempts to adjust for appreciation by adding a certain amount to the value. Currently we would use only 2%, which some may consider low, but we try to "err on the side of the Buyer" when determining markeet value.
   
   
2. The homes that have sold are adjusted to match the home we are evaluating.
   
   For example, if a sold home had 5 bedrooms, and the home we are looking at only had 4, the value of 1 bedroom would be subtracted from the price of the sold home (to make it equal in bedrooms as the home we are evaluating).
   
   
3. The analysis should only be used as a gauge in understanding the market value of similar homes in the area and shouldn't be used to pinpoint the exact value of the property. Here is what I mean:
   
   Even though the analysis gives a pretty good idea of value, I would guarantee that there are some intangibles that should be considered when analyzing them. For instance, the analysis does not take into consideration things like the level of materials used in the homes (cabinets, flooring, countertops, specific features of the floorplan, etc.) It also does not account for location other than proximity to the subject property we are evaluating. It also in no way accounts for the condition of the property itself. So, in some instances a home that has been destroyed may come up as a comparable property, and in other cases a home with an extremely large amount of upgrades and extras may come up. These can affect the final average value.
   
   
4. The $/square foot figure is another one I find helpful. Smaller homes generally get a bit more $/square foot than the larger homes in the same neighborhood. Still, you can look at the asking $/sq ft and see if it appears to be inline with the other SOLD $/square foot figures, or if it appears abnormally high or low. Then you do your best to determine if there is a logical reason for the difference (like adjusting for some of the items mentioned in #3 above).
   
   
5. People often ask about why the comparable properties have two $/sq ft figures. The first $/square foot figure is the $/sq ft for the original sold price. The second figure is the $/sq ft for the adjusted price at the bottom of the column for that home. (Accounting for appreciation, etc.) Both are rounded to the nearest whole dollar.

 I'll do a line-by-line analysis in a future blog.

If you are thinking about moving to the Salt Lake City area, make sure you get an Agent on YOUR side! 

Homebuyer Representation, Inc. is the only Real Estate Brokerage representing Buyers ONLY in Salt Lake City and the Surrounding Area. We do not list any homes. We never represent Sellers.

We work for BUYERS ONLY on the Buyer's side of the transaction.

We work to get BUYERS the Best Price and Terms when they Buy...

We're "The Real Estate Agents on the Buyer's Side" TM

If you have excellent credit and are thinking about buying a $250,000-$500,000 home in the Salt Lake area in the next 60-90 days, call us at (801) 969-8989 or contact us via the link on this page.

©2008 Homebuyer Representation, Inc. All Rights Reserved