One of the smartest financial moves you can make is to buy a home. Don’t…
Quick! How much do you think your Toronto home is worth right now? Unless you’ve met with a real estate agent, you either have no idea or a vague notion.
Many in the real estate industry bemoan that homeowners routinely overestimate their home’s value, but that’s a myth, according to a recent study by Fannie Mae and CoreLogic.
Their research shows that the homeowners they surveyed actually thought their homes were worth less than their true market value. Surprisingly, another study by Quicken Loans came up with the same results.
Overestimating and underestimating your home’s value are both dangerous to your pocketbook. Overpriced homes sit on the market until they become stigmatized and the poor homeowner ends up getting less than market value.
Do I need to explain how you’d lose money if you underprice your home? Like Goldilocks, it’s important to find that just-right price before the home hits the real estate market.
So, what is the sweet spot when it comes to pricing a Toronto home for sale?
Here’s a clue: Market value is based not on what your neighbours are asking for their homes, but on the sales prices of the homes sold by your former neighbours.
There are other major factors to consider when determining market value and all are important. These include:
- The current market
- The economy, both locally and nationally
These are all aspects that the buyer’s lender’s appraiser will consider, so it’s wise to take your time when choosing your listing agent. Evaluating a home requires experience–something that comes from years of doing it.
What about the online evaluations?
Lender’s appraisers are the final arbiter of a home’s value and they use the information gleaned from an onsite visit to the home, information from the local Multiple Listing Service and, quite often, public records to determine it.
Those big, online real estate sites, on the other hand, aren’t members of the local MLS and therefore must rely on an algorithm to come up with an estimate of its value – or Zestimate, if you were to use Zillow.com’s home evaluation tool.
How does an algorithm know the condition of your home? How does it know whether or not you’ve made improvements to the home that impact its value? And, how would it know that your neighbor deeply discounted the price of his home because he sold it to his niece?
It can’t. Which is why, at least in the case of Zillow, the evaluations so often miss the mark. In fact, a company representative claims that their home value estimates are 20 percent off almost 90 percent of the time, according to Kenneth R. Harney at the Washington Post.
Now, why are we mentioning Zestimates when Zillow is an American company? In February of this year, an executive from the company told an audience at the Ontario Real Estate Association’s Reality 2018 Conference that they are “exploring” adding Canadian listings to its site sometime this year.
So, keep the aforementioned information top-of-mind should this occur.
Pricing a home for sale isn’t rocket science, but it does take local knowledge and experience.
Not sure you understand the asking price of your Toronto property? I’m happy to help.