I remember the day.
I was in a two week class for new agents. One of those days the topic was CMAs. That stands for Comparative Market Analysis. It was how to figure out what a house is worth based on recent sales of similar houses.
Long story short, you start with the subject house. If a comparable recent sale was better than the subject house, you deducted money from that sale price. If the comparable recent sale was inferior, you added money to the sale price. In the end, you had a bunch of debits and credits for the differences that you either subtracted or added to the sale price of the recent sales….. and then you know what the subject house is worth in comparison to the recent sales.
Very logical. This is how it has been done for years. This is how appraisers do it too.
In that class, one of the other newbie realtors asked how it was done before CMAs became the standard. The teacher said that you just guessed a value.
I sort of feel like we are back to the guessing days now.
I’ve seen recently remodeled houses sell for up to 50% more than what the second highest sale price was in the neighborhood. Granted, a remodeled house SHOULD sell for more than the average house, but not by 50%.
I sold a house for $160k. The comps pointed to it being worth about $143k. We got several offers between $137k and $143k…..then we got one for $160k. That is $17k MORE than the second highest offer. Those buyers were desperate. They had lost several bidding wars and were not going to lose again.
There’s definitely been a shift in how we calculate value, and it appears that it has less to do with logically analyzing recent sales and more to do with it being a tight market. Something I hear buyers and agents say a lot these days is “Where are you going to find anything better for that price?” So, value is now determined by availability, just like the lobster prices at a restaurant. A good day on the water might end up with lower lobster prices. The very next day the fishermen aren’t as lucky and you pay more for the exact same dinner. That is sort of scary to me because what happens when the market slows a little and there are more houses for sale?