What is a Market Evaluation?
A market evaluation is an analysis of the real estate market that a piece of property belongs to. Market evaluations are done to determine the value of a particular property (known as the subject property) – usually for the reasons of buying or selling real estate. Market evaluations are done with a specific area in mind, over a certain period of time and often other factors used to narrow down properties to compare to the subject property.
Let me explain a Market Evaluation
Real estate agents often do market evaluations for clients or potential clients to determine the value of their clients’ home or a home that their clients are looking to buy. Market evaluations help home buyers compare potential properties so that they can figure out what price to offer on a home. Home sellers need market evaluations to understand list prices and how much to ask for their home when it gets listed.
Market evaluations take into account many factors related to the value of a particular home (the subject property). Usually, data from the MLS® system is used to determine what homes similar in location, age and size are selling for. Other factors a real estate agent may consider are amenities, specific location influences, sellers or buyers market and renovations or upgrades. Sales data is usually limited to a period in the past (if possible, shorter is better) so that market fluctuations do not factor into the price. Adjustments are then made to the prices to help make all the properties more comparable to the subject property. For example, if one comparable house has a garage and the subject property does not, the value of that garage will be deducted from the selling price of the comparable property to make it more like the subject property and so on.
What is a Seller's Market?
A seller’s market occurs when demand exceeds supply, or there are more buyers seeking to purchase homes than there are available homes on the market. This often leads to multiple buyers interested in a single property, resulting in bidding wars. A seller’s market is a fantastic time to sell your home as you could secure a sale price that’s higher than your listing price, or at least more than your bottom line (the lowest price you’d be willing to accept for your home). If you’re buying a home in a seller’s market, be aware that the seller has the advantage. If other buyers are interested in the same property you’re making an offer on, trying to get a lower sale price probably won’t work to your advantage. In fact, you could lose the opportunity to purchase the property altogether if a competing buyer makes a higher offer. Seller’s markets are sometimes called “renter’s markets” for this reason; sometimes potential buyers need to keep renting until they can save up a higher down payment and compete with other buyers in the market.
Real estate agents are not permitted to charge for market evaluations as that particular action suggests that the evaluation is an appraisal. In BC, only licensed real estate appraisers are able to do appraisals. It should be noted that no market evaluation can be perfectly accurate as there are too many factors to consider – personal preference, financial situations, emotional attachments, market fluctuations or even the weather!
Why Does It Matter?
There are so many factors that influence whether a home is purchased or sold and proper pricing is what makes that possible. Without market evaluations, it would likely be impossible to properly price a property. A market evaluation gives a buyer or a seller a starting point so that they can make an informed decision about buying or selling real estate.
I do market evaluations for Kamloops real estate because I work in the area and understand real estate in Kamloops. If you need a real estate evaluation because you are interested in selling your home, please give me a call. Call today (250).319.5896