Simply looking at what a neighbour sold for a while back isn’t the best way to know how much your home is worth today. While they might look similar on the surface, there are often differences that can dramatically impact the value of neighbouring properties.
While it’s challenging to do properly, it is possible to determine a tight range of valuation for your home by gathering market information, assessed values and identifying two types of comparable properties.
It’s easiest to think of the information we need to consider as falling into three main categories.
- Location, including MLS designations, schools, transit, highway access and Walkscore
- Demographics, including age, ownership, children, first language and income
- Land, including lot size, MPAC assessment and zoning, or, in the case of a condo apartment, Building, including build date, number of units and other buildings in complex
- Attributes, including square footage, number of bedrooms and washrooms, parking
- Legals and History, including legal description, year built, ownership
By gathering the above information related to the property, you can place it in a broader context and understand differences between the home and others in the area. When comparable properties are identified, you can then compare them with a fuller understanding of the differences (some of which can be significant) between the properties.
- Market changes since purchase – What’s happened since you bought the property and extrapolating a potential valuation today using your purchase price as a guide.
- Market changes over the past year – Looking at what has gone on in your region, area and neighbourhood in the past year so that we have a sense of averages for your housing type.
- Market trends over the past quarter – Examining sales numbers, average prices, percentage of sale price to list price and days on market to determine if market trends require adjusting our valuation.
By collecting market data and analyzing it, you can understand differences between your home and the market in which it is located. You can also use this information to adjust sale prices of comparable properties to reflect market changes since that sale took place.
- Most recent similar sale – Starting with most recent sale on the street or nearby similar streets, we look to identify the latest sale that we can use as a good comparable, extrapolating valuation for your property by using MPAC assessment values as equalizers.
- Closest similar sale – Starting with properties closest in location to your property, we look to identify the closest sale that we can use as a good comparable, extrapolating valuation for your property by using MPAC assessment values as equalizers as well as adjusting sale prices for time since sale.
By finding both the most recent and closest comparable properties, you have the opportunity to cross check the sale prices of these properties against market changes and the specifics of your property. In some cases, it gives a clear picture of a very specific valuation and in other cases, it highlights that certain data isn’t reliable given the other information you possess.
All of the information above is combined to be able to think through what a reasonable value would be for the property as of today. Rather than simply looking at a neighbouring property that sold a while back and saying it must be worth pretty close to that price, you have a detailed analysis that looks at the unique aspects of your property, considers what market changes over time tell us about your market and then considers comparable properties from this nuanced viewpoint.
It is worth remembering that a property valuation is designed to provide as accurate an estimate of value of the subject property as possible, but there is a difference between valuation and sale price.
A valuation is a carefully thought through estimate based on the available data and reasonable assumptions.
The sale price is what someone pays for the property.
While there is no “exact price” for real estate before a property is sold, a proper valuation gives a good understanding of what a reasonable buyer would pay for the home.
If you’d like to see an example of what a valuation looks like, please Contact Us so we can share the most useful recent example.