Pricing Your Home

Pricing your home


Automated valued models overlook key property-specific variables. There are dozens of Internet sites out there that reveal how much your home is worth. They are called “automated valuation model” (AVM) sites, which use statistical modeling techniques that calculate the property value by comparing it with similar-sized homes that have sold in your area. These tools crunch their data with publicity available numbers from several listing services and combine them with regional trends to set a sale price for your property. Although these tools are useful there are many reasons why you should seek professional help when pricing your home.

1. These Tools Are Not Always Accurate

Even though Realtors also use these tools to start a customer’s property evaluation, a lot of ground work is done after the results are revealed. Most AVMs confirm their evaluations may be off by around 5 percent. Although, they are sometimes inaccurate by up to 20 percent, according to a study by Standard & Poor’s (one of the reasons that old data is being used, especially in a fast-moving market). This means that anyone strictly guided by these calculations can be over or under market and consequently lose money or potential buyers.

2. These Tools Are Not Foolproof

Several pieces of information compose the valuation range of a property. Market data is only one of them. The rest is very property-specific, such as whether you have made upgrades or whether your roof needs repair.

Other factors include where your property is located and whether it’s desirable for potential buyers. For example: Is the neighborhood safe? Are there good schools in the area? If I need to go shopping, can I just walk or do I have to drive a long way? The AVM tools cannot answer these questions.

3. A Realtor’s Experience Counts

Real estate agents are trained to do a comparative market analysis, or a “CMA,” for every property they list for sale. This includes going to the property, inspecting the home, neighborhood and everything that will help pin down the ideal listing price. Mostly, this will give the Realtor the ability to “articulate” to potential buyers how the listing price is the right price.

Preparing a CMA is an art, not a science, there’s no one size fits all. Well-thought-out CMA’s needs deep knowledge of the dynamics of property sales in a given neighborhood. The Realtor makes judgments based on their understanding of the local market and the dozens of peculiarities that effect price, such as lot size, lot orientation, tax-assessed value, and features of the lot. This includes its terrain, access and privacy, improvements and additions, condition, quality and age. For example, your agent may know that an overextended home, the appearance of which is out of step with the neighborhood, will likely sell at a discount: An AVM will count only its square footage, and come up with valuation that’s too high.


Get it wrong and you risk deterring buyers, or not getting the money you deserve on a sale.