First, I will look at all of the homes similar to yours that have sold in the last six months. I will pick out the three homes that are most similar to yours.
Now homes have very similar features such as the number of bedrooms and bathrooms. I also prefer to use bank-owned and short-sale properties. Although it is true that bank-owned properties usually sell for less than non-bank-owned homes, your lender will sell the house as a bank-owned property if they deny your loan modification or short sale and choose foreclose.
I may use the comparable sales closest to how they will be selling the property. After I pick out the three closest comparable sales, then I do a Comparable Market Analysis.
First, I make adjustments to the other sales. For example, if a home has 10 percent more living space, then I might adjust it’s comparable value by five to eight percent.
After I make all the adjustments, I average the sales price of the three similar homes. That gives me the fair market value of the home. This process is very similar to what appraisers do, but it is not an appraisal; rather, it is called a Broker’s Price Opinion.
The short version is BPO. Is it a good valuation of your home? Well, the banks think so. In fact, they use another Realtor’s opinion of the value to determine if they should approve or deny a short sale.
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