One of the biggest challenges when listing a home for sale is deciding on the price. There are a number of ways in which a Realtor can determine the optimum list price to get the highest sale price, though most agents who get a listing follow what is called the Three P model.
- Put the For Sale sign out front
- Put it on MLS
- Pray someone buys it for a price their seller likes
We use a considerably more nuanced approach with our valuations, including a novel approach to equalizing the differences between properties.
This is important as when you compare places, you want to compare apples to apples. Ideally, we would have a property that is virtually identical to our property, located next door, that sold yesterday.
That rarely happens and we typically end up with a home that differs in some ways from our listing.
The good news is that we have access to some data that can be used to effectively equalize the differences across a sold property and our property. In doing so, we are able to perform an apples to apples comparison between the two.
The data we use comes to us courtesy of the fine folks at the Municipal Property Assessment Corporation (MPAC). MPAC uses a statistical model to assess the value of properties for property tax purposes. While these valuations are typically far below market value, they are useful in that it is a robust model that is applied to all properties.
The exact list of attributes considered, and their weighting and impact on value, is not publicly available, but it is known that MPAC considers over 150 attributes in assessing value.
According to MPAC, in almost all market areas across the province, approximately 85% of the current value of a property can be attributed to the following five characteristics:
- location
- living area
- construction quality
- age
- land (lot size or frontage and depth)
While we may not know exactly how MPAC determines the assessed value of a property, we know they apply the same model to all properties. This gives us an opportunity to leverage what we do know (the assessed value of two properties) in order to use a recent sale as a proxy for what our property could sell for in the same market.
Here’s an example.
Our client at 20 Birch Street wants to sell their home and we’ve identified a recent sale nearby at 12 Maple Avenue. The two homes appear pretty similar but there are a few key differences and likely a large number of smaller differences. Let’s take advantage of the work that MPAC did and see what we can determine based on our review.
If we look at 12 Maple, it is valued by MPAC at $742,000. 20 Birch has an assessed value of $812,000, which is 9% higher than this comparable. In terms of listing and sale prices, 12 Maple was listed at $999,000 (which is 135% of its assessed value) and it sold for $950,000, which is 95% of list price.
As we know that both homes had the same rigorous assessment process applied to their valuation by MPAC, we can use 12 Maple as a proxy for how much 20 Birch would be worth if we followed the same approach. We take 12 Maple’s assessed value, what it listed for and what it sold for and do the same thing with 20 Birch.
If we followed the same strategy as 12 Maple Avenue, we would list 20 Birch Street at approximately $1,092,900 and sell for around $1,039,000.
This is just one of eight different reviews we do when valuing a property and the result is an accurate, thorough valuation that can be used to convince buyers of the worth of your home.
If that sounds appealing to you, and you like the idea of selling for the highest possible price with the least amount of stress, get in touch with us. We’d love to use our understanding of the market to get you the best result.
