[quote author="Roscoe" date=1220517931]For pricing, I would recommend using the same methodology that an appraiser would use, as you want to make sure the final negotiated price will be equal to or less than the appraised value. The banks have gotten very conservative and are requiring the appraisers to use conservative methodology in determining the value (I speak from very relevant experience as I just had a property fall out of escrow because the property appraised at less than the purchase price I had negotiated with the seller).
I'm not an appraiser, so I can't provide exact formulas, but the general valuation approach using comparable sales would be:
- Find the most recent comparable sales: The closer the match to your house the better; ideally they should be in the same track, similar model, similar condition, similar age, same number of bedrooms, etc. You won't have access to as much detailed data as an appraiser would (e.g. financing terms, room count, etc.), but that may not be as critical to determining a list price. Try to find at least 3 similar comparable sales, the more recent the better. Also, I can assure that appraisers most certainly DO count short sales as comps!
- For each comp, start with the sales price
- Look at the per square foot trend for comparable sales over the past several months. If the trend is downward, then it's considered a declining market. Calculate the percentage monthly decline in PSF sales price. Then apply that percentage of the comp sale price as a DEDUCTION against each comp, applying a greater percentage the older the sale date.
- Apply an adjustment for square footage for each comp (if it's greater than your property, then deduct the appropriate % from the comp sale price, if less, then add the appropriate percentage)
- Apply adjustments for any MAJOR differences: for example, comp has no patio but yours has one - add $50,000 to comp
- This will bring you to an adjusted price for each comp. Take a weighted average of your 3 comps, putting more emphasis on the more recent sales.
The weighted average is a rough approximation of the appraised value of the property, using a conservative application of the comparable sale method.
It's worth doing this. Even if you negotiate a very favorable price, if the appraisal comes in lower than that price then the property is almost certain to fall out of escrow because the bank will only finance up to the appraised price. The buyer would need to fork over additional down payment cash to make up the difference, which is unlikely in this market.</blockquote>
Using Case-Shiller methodology, I put the value somewhere right around $550K today...
