Brokers use a comparative market analysis to determine the value of a property they will be going to be listing for sale or for a buyer to help determine what should they pay to purchase a home.
Every Realtor uses different methods to calculate value. All of them will use at least the past data regarding sold properties. Some will also use the active, pending, and expired homes too. Also important is the current inventory levels.
The sold data will tell what properties have sold for, how long they were on the market, and how many have sold.
The pending data can tell you have “active’ the market is….No pendings…no buyers. Lots of pendings…lots of buyers.
The active data will tell you what is the competition. If there are a lot of very nice homes priced well, then you should be prepared to be more competitive. If there are only few homes, then perhaps you can be more aggressive with pricing.
If only an average of 1 home sold a month for the past year that means only 12 homes a year will probably sell. So if there are 24 homes on the market, essentially there is a 2 year supply. A four to six months supply in normal. In the case where there is a lot of supply, then you may need to be ready to lower your price.
