At a house party on the weekend, I was asked a question I tend to get now, and then when people find out, I am a Real Estate broker. 

“How do you determine a property’s market value?”

When asked this question, I usually ask the person what they feel an agent does to determine what a home is worth. The responses tend to be.

• Look at homes online that have sold.
• Look at homes online that are for sale.
• Research what has sold on the same street as the home in question.

These are great observations and have some relevance to value however, I tend to dig a bit deeper to understand how much a property is worth. 

The first thing I do is to gather as much information about the home as possible. Features include style, number of bathrooms and bedrooms, square footage, type(s) of garage, whether the home has a family room and/or living room and how many walkouts there are.

Next is a list of upgrades. Starting with mechanicals, what is the age of the HVAC systems, windows, shingles, wiring and plumbing? Then, we move to finishes – when was the kitchen last renovated, as well as the baths, flooring, lighting, and interior paint? 

Once I obtain a mental picture, I start researching the outlying area. What is the average market activity in the town and area where the property is located? Next, how many homes have sold, how many have sold over the asking price, and what is the average time on the market before selling?

What I am looking for are trends. Trends that determine the saleability of homes in that specific area or part of town. Let’s assume the average selling price is 4% above asking and the market time is under 30 days. This would indicate that if a home were in “average condition” and priced in line with other homes, the chances of selling would be good. 

Once I tour the home to get a physical sense of what is being offered, I sit down with the homeowners, and we review the desirable features in the home and those that may detract from value. A recent example would be before placing a home on the market, we determined that the flooring in 2 of the bedrooms needed to be updated along with the wall colours. The sellers chose to make these upgrades, and most of the feedback after showings mentioned how much the Buyers liked both of those improvements.

We review other homes that have sold with similar features and upgrades, and then we balance the comparable homes as “worth more or less” than the homes we are pricing. This comparison will ultimately result in a value. For instance, if a similar home has had a full ensuite renovation and the home I am pricing has an ensuite over 20 years old, it would indicate that the comparable home would be worth $15,000 – $20,000 more. This is referred to as the Benjamin Franklin approach, weighing the pros and cons of features. At the end of this exercise, you should have a good sense of a value range. 

It gets tricky when you place value (or remove it) on a feature like an inground pool. A pool will reduce the number of potential Buyers, however “pool Buyers” who would be interested in a home would only consider a home with a pool. They will typically pay more to have the opportunity to secure a home with a swimming feature. A pool will have a resale value of $50,000 – $100,000. 

Knowing a neighbourhood, a community and the amenities that they offer has a huge impact on value. If you review the sales in the older section of downtown Whitby, moving from one street to the next may cause a difference in the value of over $200,000. Understanding the nuances of a neighbourhood is critical to obtaining the highest possible price for a homeowner.

One outlier that can dramatically affect value is the Seller’s situation. If a seller is selling having purchased a home on the condition of selling their home in a short period, the home may be priced under market value to cause a quick sale. Similarly, if a Seller is experiencing some financial hardship, the price may reflect that. Homes that are being sold where a Seller is under no stress to sell quickly will most likely sell for more than those wanting a quick selling period.

Recently, we sold a home we had listed at $900,000, which is the exact asking price. The Seller had interviewed several agents before choosing us to work with on selling the property. After the property sold, I asked the homeowner what the other agents suggested the home was worth, and one said that the home was not worth over $800,000. Choosing the right agent, a local, full-time realtor with decades of experience, can help a Seller sell for top value.

If you are interviewing agents to choose one to work with to lead you through selling at the best price, I can be reached at lindsay@buyselllove.ca or 905-743-5555. Connect with us on Facebook, Instagram, LinkedIn and YouTube.