How Real Estate Agents Value Your Home

Are you preparing to sell your home? Accurate home pricing is crucial for getting a buyer.

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Setting a listing price might be more challenging than you think. It’s easy to overinflate what you think your home is worth—partially because of sentimental attachment or the desire to get a big payout, but also because you might not have a holistic view of the market conditions.

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Nailing the right listing price is crucial. An overpriced home can languish on the market, while underpricing can leave you with less money than you deserve.

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Ever wonder how realtors determine a home's price? They combine their own experience and expertise with more objective measures of the home’s comparable value and market trends. All of these factors set the foundation for a successful sale.

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Let’s take a deeper look at how real estate agents value your home and what you can do to make sure it sells for the right price.

The Role of Real Estate Agents in Home Pricing

Your real estate agent plays a pivotal role in pricing your home. They come equipped with market insights and an understanding of comparable properties. This enables them to set a price that attracts buyers and maximizes your return.

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That being said, there’s no universal pricing formula for residential real estate. Every home is unique, with different features, conditions, and market pressures. This variability means that different real estate agents or home pricing methods could come to different conclusions about the listing price. Even though there’s a bit of wiggle room, these recommended listing prices shouldn’t be irreconcilable. 

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After reviewing how real estate agents come up with their home pricing, you’ll have a clearer idea of what to expect.

Key Factors for Home Pricing

Real estate agents look at the location, property condition, and unique features that could influence the right listing price for your house.

Where’s Your Home Located?

Location is a vital element in home pricing. Desirable neighborhoods fetch higher prices. Consider your proximity to shopping, parks, good schools, public transportation, and the like. These factors could boost your home’s value. Safety is paramount, especially for families. Homes located in areas with low crime rates tend to see bigger price tags.

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Alternatively, rundown neighborhoods can pull down home values. The same goes for houses near loud roadways or areas lacking popular amenities or development.

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All in all, your neighborhood's characteristics—such as the age of homes, upkeep levels, and community engagement—can influence how your home is perceived by potential buyers. 

What’s the Condition of the House?

A well-maintained house commands a higher listing price than a fixer-upper. That much should be obvious. But real estate agents also take into account the types of repairs, upgrades, and improvements that could make or break a sale. For example, a shoddy roof could sink a sale faster than a kitchen with outdated appliances—but both are something prospective buyers care about.

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If you’re putting your home on the market, you should discuss these issues with your real estate agent.

What Makes Your Home Unique?

Yes, real estate agents base their pricing recommendations on the square footage, number of bedrooms, number of bathrooms, the size of the garage, and lot size. But that’s only part of the equation. There are almost certainly a few features that make your for-sale home unique. And those little extras can make a significant difference in pricing!

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Features like swimming pools, new appliances, or backyard decks can set your home apart from others on the market. Maybe the house you’re selling is the only one in the neighborhood with a three-car garage. Or maybe your stylish kitchen renovation will attract bigger bids. A good real estate agent will recognize and market these elements.

How the Market Affects Home Prices

Residential real estate isn’t just about the house itself. It’s also about supply and demand, competition with other for-sale properties in the area, and the wider economy.

Buyer vs. Seller Markets

The real estate market largely revolves around supply and demand. If there are many homes like yours on the market, you may need to adjust your pricing to stay competitive.

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You’ve likely heard terms like “buyer’s market” or “seller’s market.” These phrases reflect who holds the advantage in the current market conditions.

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When demand is high but housing supply is limited, sellers benefit and can often command higher prices. On the flip side, when supply exceeds demand, buyers gain the upper hand as sellers compete for their attention, often leading to lower prices to drive sales.

Interest Rates and Home Pricing

Real estate agents know that interest rates heavily impact buyers’ purchasing power.

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High interest rates reduce the number of potential buyers, pushing prices down. Why? Because not everyone can afford to take out hefty loans or mortgages when interest rates are surging.

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Lower interest rates, on the other hand, may entice more buyers into the market. This gives you, the seller, the opportunity to ask for a better price.

Analyzing Sales Data and Trends

The current market is only one facet of the equation. Home valuation also takes into account historical sales data. Your real estate agent should leverage this information to help you gauge the fluctuations in home values in your area over time. This data paints a clearer picture of what to expect going forward.

Trends in Property Value Over Time

Your real estate agent will track how home values in your area have changed. If prices have steadily increased, it might be worth setting a higher initial list price. But if values are declining, they might recommend a lower listing price to attract would-be buyers.

The Power of Comparative Market Analysis

Real estate agents use a Comparative Market Analysis (CMA) to evaluate home prices near you. The CMA compares your home to recently sold properties with similar features to determine an ideal pricing range. Agents use this information to help you fine-tune your home pricing strategy. The right data ensures that you're competitive and aligned with market projections, making your listing more attractive to buyers.

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A typical CMA considers various elements, including the home's location, size, condition, and amenities. The data can show how similar homes have been priced and sold, providing invaluable insight into determining your own home’s price.

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CMA reports are also influenced by local market conditions. For instance, if your neighbor's home sold for a premium, it might boost your property's value. 

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After receiving a CMA, consult with your real estate agent to understand what it means for your listing strategy. Pricing should not be set in stone; it’s important to adjust based on what the CMA reveals about neighborhood activity.

Why Do You See Different Home Pricing Estimates?

There are a few different methods and tools for determining how much a home is worth. Here are some of the most common, their strengths, and their weaknesses.

Pre-listing Appraisals

This is the gold standard of home valuations. An appraiser’s whole job is to objectively determine the value of a home. Their adjustments are so reliable that a full appraisal is required after closing by the lender. This helps the lender know the true value of their investment.

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So, what are the drawbacks? A pre-listing appraisal is pretty expensive. And since an appraiser needs to see the house in person, it can be time-consuming too. Sometimes you just want fast, inexpensive answers—which is why some agents look for alternatives.

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It’s also important to note that if you get a pre-listing appraisal, you’ll essentially need to do the process twice. Lenders currently do not accept pre-listing appraisals. So, you’ll need to get an additional appraisal after closing.

Broker Price Opinion (BPO)

Another option is a Broker Price Opinion (BPO). A BPO is a tool that provides a general estimate of a home’s value, often used in situations where a full appraisal isn't necessary or practical. It relies on comparable sales, or “comps,” which are similar properties in the area that have recently sold. However, it’s worth noting that a BPO isn’t as detailed or comprehensive as an appraisal conducted by a licensed appraiser.

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One key limitation of a BPO is that it’s not entirely objective. A broker's perspective can sometimes be influenced by factors such as market conditions or the client’s goals. For example, a broker might lean toward a higher estimate to appeal to a seller or a lower one to attract buyers. While BPOs can be helpful as a quick snapshot of your home’s potential market value, they should be used with caution, especially if you’re making major financial decisions.

Automated Valuation Models (AVMs)

One of the easiest, but least accurate options is an Automated Valuation Model (AVM). Popular examples include Zillow’s Zestimates or Redfin Estimates. These online estimates are super easy to generate, lending to their popularity. But their determinations are entirely computer generated. There’s no human expertise in the equation at all—which means that your home’s unique features are lost in the shuffle; not to mention location nuances and marketing conditions.

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This option might be okay for curious buyers early in their journey. But it’s a far cry from real home pricing verification necessary for sellers hoping to set the right price for their property.

Reverified: Fair Deal Zone for Home Prices

Fortunately for home sellers and real estate agents, there’s a new option for home pricing verification that affordably combines accuracy and expertise.

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Reverified pulls together thousands of data points—regarding location, market trends, house features, and even unique features—into our Fair Deal Zone report. We call it the Fair Deal Zone because it’s the optimal home pricing range that benefits home sellers and buyers. This ensures smooth sales that get sellers like you the right return on your investment.

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The Fair Deal Zone report is faster and more affordable than a pre-listing appraisal. It’s more impartial than a BPO or an agent’s opinion. And it’s more accurate and reliable than an AVM.

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It’s no wonder why brokers and agents are choosing our Fair Deal Zone report to come up with smart home pricing strategies.

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So, whether you’re an agent or a seller, you can order a Fair Deal Zone report to see your home’s true worth.