Pricing Leavenworth Houses : The Life of a Leavenworth Real Estate Agent

One of the tasks we spend quite of bit of time on during the week is pricing homes or building lots for Leavenworth home owners.  Some homeowners call us curious about the state of the market and others are serious about getting their house on the market.
We provide a Comparative Market Analysis (CMA)  free of charge to any Leavenworth area property owner considering selling their property.  For some property owners, an appraisal by a licensed appraiser might be more appropriate. (For example, a divorce or an estate).

What is market value?
Market Value is the estimated amount for which a property should exchange on the date of valuation between an educated buyer and a reasonably motivated seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without undue influence . (from Wikipedia)
There are three methods to find the value of real property.

Sales Approach (use recent sales of comparable properties)
Cost Approach (how much would it cost to build this property)
Income Approach (how much income does this property produce)

The sales approach is the most used for residential property, though the cost approach is helpful for newer properties and as a “gut check” when a property seems overpriced. (Ask yourself – can I build the same house myself for less money?)
How do we come up with value?

site visit
tax record search
comparable sales
competition currently for sale
months of supply of current inventory
regularly previewing of Leavenworth homes for sale

What is a CMA?
A CMA is not an appraisal and does not conform to the Uniform Standards of Professional Appraisal Practice (USPAP) used by licensed appraisers.  One of the biggest differences between an appraisal and a CMA is that we use houses that are currently listed for sale. This is important data.  If there is a similar house or condo for sale and it’s not selling, the value of your property is likely to be less than the listed price of the property for sale.
We also use our knowledge of offers that were submitted by buyers but not accepted by the seller.
For example, in 2007 we received multiple offers for a property that was listed at $1,300,000. The offers we received were both at $1,000,000.  If the seller had accepted an offer it would be clear what the market value was, but since they did not we at least knew a price range. The house had a market value between $1,300,000 and $1,000,000.
We spend a few days writing a report that explains our research and we attach comparable sales to this report.  A CMA is not something that a computer can just spit out.  It is a bit of an art and we put serious consideration in every CMA we prepare.
What Happens Next?
Sellers have many different reactions to our reports. In a market where prices have been going down for a few years, most sellers are disappointed in our price.

Some sellers decide not to sell in the current market. Often this is the wisest choice.
Some sellers ask us to list their home at the current market value.
Some sellers choose to work with another agent who will list their house at a higher price.

At the end of July 2011, there are 213 homes on the market in Leavenworth. This is more than 2.5 years of supply. This is an extreme buyers market and we recommend that only those sellers who are very serious and motivated should list their home.
 
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This is part of a series of posts about how we spend our time as real estate agents.
Previous posts include:
Previewing Leavenworth Houses