Lancaster PA Luxury Real Estate

 I was recently asked about the connection between a property's assessment value and its potential selling price.  There is often confusion about the various methods that are used to evaluate property and it's important to be able to distinguish between them and to know how they may be helpful to you in your home buying decision.

Property Assessment - The assessment is a tool the town uses to determine your property tax amount.  In Massachusetts each town has an assessor who is responsible for determining the value of each property and its improvements.  The assessor reviews sales data from the previous year and, based on sales prices of similar homes, will arrive at a value for each parcel.  With today's declining real estate market, assessments do not necessarily reflect a property's fair market value since the data used may not be up-to-date or accurate. Because of this, it is not unusual to see a home listing with an assessment that is higher than the asking price.

Comparative Market Analysis - Real estate agents establish fair market value by compiling a report called a CMA or Comparative Market Analysis.  This analysis is based primarily on comparable properties that have sold in the same neighborhood, of a similar size and style and of a similar age.  The sales should have taken place no longer than six months ago to be valid comparable sales.  The analysis will also take into account properties that are currently on the market, under agreement and also those that have expired.  The goal of the CMA to a buyer agent, is to establish an offer price that is the lowest possible that a seller might accept. 

Appraisal - When you have an accepted offer on a property your bank will hire an appraiser to arrive at an estimate of value for the property you will be using as collateral for your mortgage loan.  An appraiser is licensed and trained in the practice of developing an opinion of value for real property known as Market Value.  Similar to the CMA, the appraiser will base the property value on three recent sales of similar properties in the same area that have sold over the past six months.  A professional appraisal is detailed and includes land to value ratio, general real estate conditions in the area, zoning information and a sketch of the property showing the layout of the rooms. 

All three methods of property valuation will factor into your home purchase. 

• The Assessment will assist you in calculating the property taxes,
• Your realtor's Comparative Market Analysis will help you to arrive at an appropriate offer price, and
• The Appraisal amount should support the price you are paying for the home.

Related Posts:

Home Warranties, Are They Worthwhile?

Real Property vs. Personal Property - What is Included in a Home Purchase?

Property Disclosure - Who Has the Burden of Proof?

Courtesy of Claudette Millette, The Buyers' Counsel, 800-392-1446, Contact me 

Charm pricing is very prevalent in our society. A product is advertised at $9.99 rather than $10 or $97.50 rather Charm Pricing and Real Estatethan $100. When sellers back off the rounded number by a few cents or few dollars to make something look less expensive, it's referred to as "charm" pricing.

Such pricing make sense for items sold at retail for a set price. But what about real estate pricing? Does a seller gain anything by setting the listing price to seem lower than it actually is, such as $149,900 instead of $150,000?

Marcus Allen of Florida Atlantic University and William Dare of Oklahoma State University did the research. They studied a large sample of home sales and discovered that when charm pricing was used, homes tended to sell closer to the listing price than those offered at a rounded price.

They concluded that when sellers use charm pricing, buyers tend to perceive that the listing price is close to the seller's reserve price (the lowest amount they will accept). Sellers appear to indicate the price is fixed, and they will accept a minimum amount of bargaining.

On the other hand, sellers who list homes with a rounded price seem to be indicating there is more room for bargaining. They expect this price to be a mere starting point for negotiation. They need a round figure only to position the property in the range of comparable properties.

William "Art" Sexton
Sexton@RERNC.com 
www.Raleigh-Real-Estate.biz