Automated Valuation Models and Comparative Market Analysis
If you are a homeowner thinking of selling, most likely you will want to start with "the comps" as in "how much is my home worth?".
Most Sellers turn to authority websites offering automated valuation models (AVMs), the most well known of which is the "Zestimate" from Zillow.
These online tools work on algorithms of recently sold homes to come up with a value. The algorithm looks at data from the public records such as SqFt of the home and lot, bedroom and bathroom count and age of the house. As such, they are just as likely to be correct as not.
The AVM does not know if your house has a new roof, new wood floors or an updated kitchen and your neighbors does not. Or if your house is on a quiet street and the one being used for comparison is on a busy street. The AVM is not looking at the finer points that make pricing homes an art more than a science.
When deciding to list your home for sale, often your Realtor may present a CMA also known as a Comparative Market Analysis. The problem with many CMAs is that if the wrong comps are used the wrong conclusion can be drawn. But, in general, it does make sense to take a look at properties for sale, properties currently under contract and recently sold listings. Hopefully the Real Estate Agent uses the right comps.
Broker's Price Opinion
A variation of the CMA is the BPO standing for "Broker's Price Opinion". This is usually used by banks as part of the foreclosure process and has some more stringent criteria than a CMA. If you are selling your home as part of a corporate relocation and a "relo" company is involved they may order a BMA which is similar to a BPO.
Lastly, there is an Appraisal from a licensed appraiser. The appraiser will utilize the sales comparison method, what we call "comps" as well as other approaches and then make further adjustments or reconciliations that he or she is trained to calculate. Please note, your value from an appraisal perspective may be different than for a refinance.
For a personalized CMA or for tips on Selling Your Home for the Highest Price Possible contact Ellis Posner at 310 975 5139.