How to determine value in today's market - Check out past sales and current listings

 

HONOLULU ADVERTISER March 12, 2006

BY LISA SCONTRAS

Custom Publishing Group

 

Any news about the local housing market travels fast. So it should come as no surprise the residential housing inventory is up prompting competition among sellers. The increased inventory enables buyers to comparison shop — comparing prices, condition, features and location. For sellers, more competition makes coming up with the right price critical to selling the home in a reasonable amount of time. And the process is more involved than just waiting until your neighbor’s home sells and then tacking on an extra 10 percent.

 

In this kind of changing market, John Jacobson, real estate analyst at Prudential Locations, LLC, recommends going back to the basic pricing fundamentals. “The very definition of ‘market value’ is what a buyer is willing to pay for your home,” offers Jacobson, who has spent 16 years analyzing sales data from Oahu’s neighborhoods. “The best way to do that is to look at comparable properties — what other similar homes have sold for in your neighborhood.” And that process is more complicated that you might think.

 

Whether or not your home has a swimming pool, a view, has a second story or is located on a corner lot — even what construction materials were used —can be important to a buyer in determining home’s value.

 

“These items may or may not matter, depending on your neighborhood,” he adds. “This is where an experienced Realtor can help you analyze the values of the comparable properties, their features, and come up with a pricing strategy.” An even more detailed approach to determining value is the price-per-square-foot method, which takes the same comparable properties and normalizes everything that is the same about two properties to give a value to what is different about one or the other.

 

Jacobson describes it this way: “If you have a totally homogenous neighborhood, the price per square foot is exactly the same for each unit,” he says. “Then you apply that to a condo building. Units on a particular floor have a certain value, but if you go up 10 floors, the value increases. That difference is the value of that feature — in this case being on a higher floor.” Figuring out the price per square foot can often more accurately describe what is happening in a market.

 

“Let’s say last year the median sale price in a neighborhood was $1 million and this year it went down to $800,000,” Jacobson explains. “When analyzing the price per square foot you find it was just three smaller homes that sold. So where you thought it was a change in the market, it’s really just a change in the size of homes that sold.” In addition to comparable past sales and competitive listings, experts say the condition and location of the property can have an effect on price, depending on the neighborhood.

 

“Location on a side street becomes important if the main street has heavy traffic,” Jacobson notes. “Then location becomes important.” “The real trick is positioning your house in the marketplace,” says Scott Higashi, executive vice president of sales at Prudential. “As Realtors, our job is to look at the past sales, and then look at the competition to see where your house fits in. Then we develop a marketing strategy so we can appeal to the right set of buyers.” This strategy might involve repairing damaged items or painting but the main objective of the Realtor, according to Higashi, to get the highest price for the property in the shortest amount of time.

 

“A lot of what we do is based on experience and training,” maintains Higashi. “Some of it is objective — past sales and competitive listings — but a lot of it is subjective. It’s not an exact science.”

 

Positioning a home has to do with accentuating the home’s positive features among the competition.

 

“Let’s say you’re up against four renovated houses and yours is not,” he says. “It’s tough but that becomes part of our strategy and how we position or market it. I’ve heard many buyers say things like, ‘Oh, I don’t want cherry cabinets, I’d rather have maple.’ Some people might really rather do their own renovations.” Bottom line: The value of a property, says Higashi, is not determined by the seller or the agent. It’s all about how the buyer sees the property that matters.

 

“They determine the value and so we help sellers try to market it to them,” he says. “Only the buyer can say, ‘This is a million dollar view, and I’m willing to pay that for it.’”

 

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