The seller’s market that was spurred on by the onset of COVID-19 across the U.S. has led to some impressive (if not altogether unbelievable) jumps in the value of real estate seemingly in every corner of the country.
Nationally, the average price of a single family home (SFH) has increased from $345,400 in late 2020 to $376,000 as of May 2021.
In the Lowcountry, that same statistic has risen 28.5% from this same time last year, pinning the current average sales price in the local market at $579,160 (up from $450,678 a year ago).
This healthy increase in real estate equity has a lot of people tempted to sell, yet many property owners are saying they don’t know where or what they would buy if they did sell, acknowledging the low inventory of properties available for purchase.
Whether or not this is the right time to sell, the curiosity of what your home is really worth seems to be more present now than ever. After all, your home is typically among your most valuable assets, and it is exciting to imagine just how much it could sell for in today’s market.
And, that’s the $64,000 question, isn’t it?!
Who, how, when, and what factors come into play when it comes to establishing the real value of your home?
Is it Zillow? Or the listing agent? The seller? Or the buyer? Maybe it’s the appraiser … after all, they are the ones the lenders listen to, right?
Let’s be clear on one thing: It’s NOT Zillow! I mean no disrespect to the country’s most prominent data-conglomerate consumer website, as it’s an impressive entity in the industry.
But, having been involved in the pricing of thousands of homes myself, I’ve always understood the benefit of noting and considering the nuances and unique components of each property in person before asserting an opinion of potential market value.
As good as the various algorithms that work their magic behind the curtain at Zillow might be, they are no match for a front-line, onsite, studied and experienced evaluation of a property when it comes to understanding how that property fits into the marketplace among a wide array of variables and relevant properties.
Which brings us to the appraisers – and, boy, what a challenging time they have right now, with sharp appreciation trends, limited comparable properties, and expectant buyers, agents and lenders.
While appraisers are bound by a set system of tools, tactics and practices when it comes to stating their opinion of value for a particular property at a particular time, that opinion is ultimately just that – one person’s professional opinion.
That doesn’t make it right or wrong; it just happens to carry some significant weight when it comes to a lender and/or a buyer feeling confident about proceeding with the purchase transaction. That said, in many instances in today’s market, even when an appraiser’s opinion of value falls short of the purchase price on the contract or sale, the buyer might simply decide to bring more cash to the table to complete the purchase.
So, that might suggest that the buyer actually sets the real value of the property, right? Well, not exactly … or at least not completely.
The buyer certainly helped get to the final number, but in my experience, most buyers would have preferred to have paid less if they could have, which means that the seller (negotiating to get the price as high as possible) had an equal role in setting the real value of the property. After all, the seller set the price when they listed the property for sale, openly declaring a list price as what they want or hope to sell the property for when it hits the market.
And this process likely involved a careful study and discussion with the seller’s agent, who helped frame where the property might get the best response among buyers.
So, the agent really set the real value of the property, it seems! No, not really. While a seller might rely on and heed the best advice of their agent on where to price the property, it’s absolutely the seller’s final decision on where to price the home. After all, it’s their house, their prerogative, and their final choice.
Therefore, real value of a property is ultimately determined by the market, which is a combination and mash-up of all the above factors and players … plus a whole lot more.
Take, for instance, the high volume of multiple-offer scenarios we have seen in the market over the past 12 months. Nothing is more emblematic for a robust market than multiple offers around the market area, and it is very clear and certain that in those scenarios, the market is establishing and setting the real value for those properties.
Determining the real value of your home, therefore, is ultimately the result of a comprehensive and thoughtful effort to position, expose, navigate and negotiate a final price in an open market with a buyer who is ready, willing and able to purchase the property under other mutually agreeable terms that sometimes have just as much weight as price (i.e., closing timeline, possession, contents, contingencies, etc.).
These are fascinating times in real estate, and price/value is just one of many topics that are at the forefront of such important transactions in peoples’ lives.
Chip Collins is the broker-owner of Collins Group Realty firstname.lastname@example.org or collinsgrouprealty.com