How To Determine Today's Market Value

 

Research analyst makes a science of pricing property

 

HONOLULU ADVERTISER   November 18, 2007

 

BY LISA SCONTRAS

 

Custom Publishing Group

 

Any news about the local housing market travels fast. So it should come as no surprise the residential housing inventory is up prompting competition among sellers. The increased inventory enables buyers to comparison shop — comparing prices, condition, features and location.

 

 

For sellers, more competition makes coming up with the right price critical to selling the home in a reasonable amount of time. And the process is more involved than just waiting until your neighbor’s home sells and then tacking on an extra 10 percent. In this kind of changing market, Dan Tabori, who heads the research efforts for Prudential Locations LLC, recommends going back to the basic pricing fundamentals.

 

“The very definition of ‘market value’ is what a buyer is willing to pay for your home,” offers Tabori. “The price that the seller paid for the property plays very little in determining the current market value. The best way to do that is to look at comparable properties — what other similar homes have sold for in your neighborhood.”

 

And that process is more complicated than you might think.

 

Whether or not your home has a swimming pool, a view, has a second story or is located on a corner lot — even what construction materials were used — can be important to a buyer in determining home’s value.

 

“These items may or may not matter, depending on your neighborhood and your specific property,” he adds. “This is where an experienced Realtor can help you analyze the values of the comparable properties, their features, and come up with a pricing strategy.”

 

An even more detailed approach to determining value is the price-per-square foot method, which takes the same comparable properties and normalizes everything that is the same about two properties to give a value to what is different about one or the other.

 

Tabori describes it this way: “If you have a totally homogenous neighborhood — that is one where all houses are similar in quality, features and age — the price-per-square-foot is exactly the same for each unit,” he says. “If you apply that to a condo building, the units on a particular floor have a certain value, but if you go up 10 floors, the value increases. That difference is the value of that feature — in this case being on a higher floor.”

 

Figuring out the price-per-square- foot can often more accurately describe what is happening in a market.

 

“However, given that the properties in neighborhoods in Hawaii are often not homogeneous, price-per-square-foot analysis becomes even more important,” Tabori explains. “Let’s say last year the median sale price in a neighborhood was $1 million and this year it went down to $800,000. At first glance, it may look like prices have declined significantly in that neighborhood. When analyzing the average price-per-square- foot you may find it was the mix of homes that sold that affected the median price. So where you thought it was a change in the market, it’s really just a change in the size, age or features of homes that sold. In fact, the price-per-square-foot may have actually increased.”

 

In addition to comparable past sales and competitive listings, experts say the condition and location of the property can have an effect on price, depending on the neighborhood.

 

“Location on a side street becomes important if the main street has heavy traffic,” Tabori notes.

 

“The real trick is positioning your house in the marketplace,” says Scott Higashi, executive vice president of sales at Prudential. “As Realtors, our job is to look at the past sales, and then look at the competition to see where your house fits in. Then we develop a marketing strategy so we can appeal to the right set of buyers.”

 

This strategy might involve repairing damaged items or painting but the main objective of the Realtor, according to Higashi, to get the highest price for the property in the shortest amount of time.

 

“In this market, the experience and training that a Realtor brings to the table is vital,” maintains Higashi. “Selling your home is not an exact science, but a good Realtor relies on proven techniques to properly value your home and place it in the best position for sale”

 

Positioning a home has to do with accentuating the home’s positive features among the competition.

 

“A renovated property, with improvements as simple as a fresh coat of paint, nice landscaping or minor repairs, help with positioning a property competitively among others,” says Higashi.

 

Ultimately, he says the value of a property is all about how the buyer sees it and whether they can envision themselves living there.

 

“Many sellers rely on the fact that they put a lot into the home — they spend a lot of money on beautiful renovations and high-end fixtures, and hope that this creates a higher value,” he explains. “But that isn’t always the case.”

 

He recommends that sellers accompany their Realtor to open houses in the neighborhood so that they get a feel for the competing inventory.

 

“It can be a real eye-opener for sellers when they see exactly what other properties a buyer has to choose from,” he adds. “It helps the seller to think of the home in the context of the others.”

 

Ultimately, it’s the buyers who determine the value.

 

“Only the buyer can say, ‘This is a million dollar view, and I’m willing to pay that for it,’” he says.

 

 

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