Determining the market value of a specific property is a complex process. Since market value is ultimately established by buyers, we assess it by analyzing recent sales of similar properties in the same geographic area. Instead of directly asking buyers what a property is worth, we examine actual sale prices to determine what buyers are willing to pay for a comparable home.
Let’s say we need to determine the value of a 2,400-square-foot, two-story home near the Legacy Golf Course in Norwalk, built in 2015. To do this, we look for other two-story homes of similar size, in the same neighborhood, built between 2010 and 2020, that have either sold in the last six months (or up to a year if necessary), are currently pending (under contract but not yet closed), or are actively for sale.
Ideally, we would find several properties in each category. If not, we may need to adjust our search criteria. The first group we examine includes recently sold properties. We identify the three most comparable homes and then make adjustments based on differences between those and our subject property. Since no two properties are identical, these adjustments help level the playing field. This step requires extensive experience and a deep understanding of the real estate market.
For instance, if one comparable home has an extra bathroom that our subject property lacks, we subtract the estimated value of that bathroom from the sale price of that home. If another comparable home has an unfinished basement while our subject home features 900 square feet of finished basement space, we add the value of that finished area to the sale price. Other common adjustments include differences in countertop materials (solid surface vs. plastic laminate) and garage size (two-car vs. three-car garage).
Once we determine the adjusted sale prices of the comparable properties, we establish a market value range for the subject home. For example, if the adjusted sale prices are $314,217, $315,048, and $315,721, we can reasonably conclude that the subject home should sell within that range. However, there’s one more step.
What if we find several similar homes currently listed around $315,000 that have been sitting on the market for months without selling? This suggests a softening market, possibly due to excess inventory, which may require pricing the subject home lower to attract buyers. Conversely, if there are no comparable homes currently for sale, but we see that three similar homes priced around $315,000 recently went under contract within days, this indicates a strong market where the subject home may be priced slightly higher.
The key takeaway is that buyers determine market value—not real estate agents and, not sellers. A property is only worth what buyers are willing to pay. The seller’s original purchase price, outstanding mortgage balance, or financial needs for their next home do not influence market value. Additionally, pricing a property correctly from day one is crucial. Some sellers make the mistake of overpricing their home initially, thinking they can always lower the price later. However, this strategy often results in the home selling for less than if it had been priced correctly from the start. A well-priced home creates a sense of urgency, motivating buyers to submit strong offers.
I hope this gives you insight into the process of pricing a home for sale. I genuinely enjoy analyzing market values. If you're curious about the approximate value of your property, I’d be happy to provide a quick market analysis. Just reach out and let me know!
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Norwalk IA Real Estate – Jon Niemeyer, Broker Associate/REALTOR® at EXIT Realty and Associates. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call Jon Niemeyer at 515-490-4675.
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I am often asked if a garden adds value to a property. That was the poll question last week and I will let you know how you readers responded to that question shortly. My answer to that question is, indirectly, but it depends. Before you delete this
In the dynamic world of real estate, success often hinges on more than just market trends and property values. At EXIT Realty North Star, we believe in the transformative power of personal growth and development. Continuously seeking ways to gro