How much is a one carat diamond worth? Anyone who has shopped for one knows that the price could have a significantly wide range of value. It’s been said that purchasers should consider the color, cut, clarity and carat size to compare stones but when it gets down to decision time, buyers still want to know “how much is it worth?”
Real estate valuation can be equally as confusing to the public. There are three commonly used tools that today’s home buyers rely on to make decisions but they vary significantly in the methods used to make the determination as well as the possible final consideration.
Appraisals are an opinion or estimate of value based on specific guidelines made by individuals who are licensed and possibly certified. Buyers and sellers may be reluctant to engage an appraiser because there is a fee of several hundred dollars that must be paid in advance even if no sale is ever consummated.
A Broker’s Price Opinion (BPO) as defined by the National Association of REALTORS® is an “estimate of the probable selling price of a property.” The Dodd-Frank Act describes a BPO as “an estimate…that details the probably selling price of a particular piece of real estate property and provides a varying level of detail about the property’s condition, market, and neighborhood, and information on comparable sales, but does not include an automated valuation model.”
A Comparative Market Analysis (CMA) is a commonly used tool of salespeople to provide information to buyers and sellers to facilitate a sale. In most cases, it would be difficult to distinguish a CMA from a BPO because the steps considered are essentially the same and practitioners commonly use the terms interchangeably.
Another method called Automated Value Model (AVM) use software to search available data on the Internet to arrive at an approximation of value. Zestimates found on the Zillow site use this method. AVM’s may not consider all the market activity such as MLS sales and active listings. They can’t make adjustments based on human experience and market knowledge.
For what it’s worth, a buyer or seller might want to acquire as much current and factual information as possible from a trusted real estate professional familiar with the market before making a decision on the largest single asset most people acquire.
All my best,
Myra Spano, REALTOR®
About the Author:
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority. Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
For information about purchasing a home in Virginia Beach, visit her website. This site is focused on homes available for sale in Hampton Roads, Virginia. Email, call or text to make an appointment begin your home search.
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need. Contact us now to make your home dreams come true!