Appraising your home with a realistic, and critical, eye
Understanding Market Value
When selling your home, the whole idea is obviously to get the maximum price and the best possible terms during the window of time when your home is up for sale. But what is your home actually worth on the open market? There is no price cap; market value is literally defined as ‘what the market will bear’. Obviously, what the market will bear changes depending on many factors, the most prominent of which is the current inventory of similar homes for sale in your neighbourhood.
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You might be surprised to learn that the sale price of a home can vary wildly from its assessed value for tax purposes – especially if an assessment hasn’t taken place in a while, or if significant renovations have been made to the property since it was last assessed.
Key Pricing Factors
Price is subject to many factors, not the least of which is location. In a community with good schools and shopping, a growing population and a limited housing supply, it's likely that prices will rise no matter what the economy at large is doing.
On an individual level, homeowners who must sell very quickly may have less leverage in the marketplace than those who can afford to wait – not necessarily to wait for macro-level market changes, but simply wait for a holiday long weekend to end, wait for similarly priced homes to sell on their street, or wait to complete needed repairs. Your selling timeline may affect the net price you are able to achieve for your home.
Ways to Determine the Value of Your Home
Even if you're not planning to sell your home right away, Jamie will be happy to prepare a comparative market analysis (CMA) for you as a marketing service, based on his extensive experience in the Toronto real estate market. His goal is that you will be so happy with the valuable information the CMA provides, that you will be able to make excellent choices regarding your home sale, whenever you do decide to move. The CMA uses a number of tools, such as recent sales of comparable properties in your area and a personal inspection of your home, to determine its expected market value; see Elements of a Great Comparative Market Analysis for more information on the CMA.
You may also want to purchase a professional home inspection (the fee is typically $400). This type of appraisal relies on an in-person inspection of your home to evaluate the condition of the ‘building envelope’ and your home’s major systems, such as heating and cooling, air/vapour/thermal, roof, electrical, plumbing, etc. The home inspection report will contain a brief summary of your home’s overall physical condition as well as detailed notes taken by the inspector as he or she examines the elements of your home. You may find the home inspection report a useful tool in determining the sale price; for example, if your home is in very sound condition, it can command a greater asking price than a home in need of significant repairs.
You can always check online listings for homes that have recently sold in your area and use their prices as a starting point. Look at homes that are for sale in your area too and pay attention to those that haven’t sold; ask Jamie if they are actually comparable to your home, what any differences might be, and why they may still be sitting on the market.
Price per square foot is a time-honoured method of real estate valuation that is used primarily in pricing Toronto condos and newly constructed homes; it becomes less useful when evaluating re-sale homes, because square footage is notoriously hard to calculate accurately, and everyone calculates it differently. Interior room measurements may differ from the original builders’ plans which go by the exterior walls (if such plans can even be found, in the case of older homes). It is also important to note when calculating square footage that it does not include basement living space, closets, hallways or baths.