How do we determine the value of a home?

Many people have the misconception that home valuation is an exact science, in fact, it is not.  The ultimate value of a home is what a buyer is willing to pay for it.  Therefore the price of your home will depend on the market, your specific location and amenities, and the potential buyer. 

One buyer, for example, may be willing to pay you more for the pool your home has while another buyer may not be interested in the pool at all and hence, its value will be less to him. 

As real estate agents, our job is to determine a price that will engage potential buyers to look at your home.  We come up with a value range by examining what homes in the nearby area have sold for and also what they are currently listed for.  From there most agents will narrow down the value based on a home's square footage, its lot size, the useability of the lot (flat, zoned for horses, etc.) and the amount of upgrades and appeal it has. 

Real estate agents must also take into account the current market forces. When the real estate market is in an up-trend, for example, it is not uncommon to see listings priced 2-5% more than the last comparable sale and it is for no other reason except that the general demand for homes has gone up.  Likewise, in a down-market there are often listings priced 2-5% below the last previous sale because they simply are not able to sell at the previous levels because the demand is down.  In this regard, homes are not unlike stocks.  They go up in value and, yes, the do go down as well.  

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