Determining the market value of a Fort Lauderdale home may not qualify as science fiction, but it can be a bit of an adventure in time and space—at least when it comes to selecting similar homes that recently sold (commonly referred to as “home comparables” or “comps”).
Most folks understand the general economics principle that the value of something, including a house or condo, is the amount someone is willing to pay for it. So, it would seem logical that recent comparable home sales would be the best benchmark for determining the market value of a property. In a nutshell, home comparables are the same (or similar) size homes that have sold recently. Also, logic would dictate the most important factors that would affect the value of a home would be the size of the home, upgrades and (you may have heard this before) location, location, location!
Not so fast! Like so many things that seem simple in theory, when it comes to establishing local comparables for the purpose of setting a fair asking price or mortgage amount, practical matters can add a layer of complexity. When you’re ready to buy or sell a home, it is good to have an understanding of the factors that come into play as appraisers and loan officers identify valid home comparables.
The Adventure of Time and Space
Space
There can be different ways to look at the size of a property. Square footage is a commonly used measurement. However, there can be total square footage and “under air” square footage. Total square footage includes the entire home’s footprint, including patios. “Under air” means square footage that benefits from fixed air conditioning and/or heating systems.
The space part of this adventure has another aspect. Within a neighborhood, some streets have homes that are more upscale (and pricey) than others. Or, there can be nearly rural parts of a suburban (or even an urban) community—so using the distance from one point to another may not be an accurate way to determine if nearby neighborhood comparables are comparable/similar. In other words, although within a short distance, to be truly comparable, a nearby sale could justify an adjustment to the home’s value. Furthermore, even though one dwelling might be only a block away from another, it might be part of a different school district. Even if you don’t have children, a school’s ranking can be an important factor for prospective buyers, and require another adjustment.
Time
The time part of this adventure has to do with defining the term “recent”. Sales within 90 days generally qualify as an ideal scenario. In some cases, there may not be enough closed sales of similar homes. Therefore, some lenders will go back 6-12 months—a warping of the time-space continuum (a perfect scenario for science-fiction writers!).
If you’re curious about the market value of your home, contact us for a complimentary highest price market value analysis.
