You’ve probably heard the term “market value” more than a few times, but do you really know what it means or understand how it is established?
Market value refers to the price your home should sell for in the current market, given a reasonable time period and circumstances conducive to a fair sale. Under normal market conditions, 30 to 90 days is considered a reasonable time period. For the sale to be considered fair, both buyer and seller must be reasonably informed as to relevant market information and neither party should be under excessive pressure to make a speedy or forced sale.
The most common method of establishing your home’s market value is comparing it to similar homes that recently sold or are currently for sale in your area. The greater the similarity between the comparable homes, the more recently the comparable homes were sold, and the more homes involved, the more effective the comparison is in determining your home’s market value.
The comparison takes into account many factors, such as your home’s age and condition, its features (number of bedrooms and bathrooms, square footage, views, upgrades, etc.), and its location within the neighborhood. A realtor can usually assess these and other factors (such as real estate trends and current market conditions) that determine your home’s market value in a process known as a Comparative Market Analysis.
An educated estimate of your home’s market value is very useful when you are selling your home, as it will help you establish an asking price that should increase your chances of a faster sale.