Yes, that’s a question I hear ALL the time.  For some reason Sellers are never entirely sure what the process is or just why one Realtor comes up with one number and another comes up with a different number.   Needless to say it’s not an exact science, but many Realtor’s keep the process a carefully guarded secret… and I have no idea why.  The latest Supreme Court ruling allowing SOLD data to be made available to the public had many Realtors up in arms.  But really …. It’s just data.  The expertise comes in the interpretation of that data.   I, for one, am not threatened by people having access.   In fact, as I see it, the Realtor’s most important role is to provide information and education to their clients to make informed decisions that are right for them and their family.  Simple, right?  Ahhhh, not so much.   Did you know most homeowners spend more time picking shoes than they do picking a Realtor to handle the sale of the biggest asset they have?    

A “Comparative Market Assessment” commonly referred to as a CMA, or Home Evaluation or Market Evaluation … so many names, but it’s all about “What’s my Home Worth?”  There are primarily two ways that you’ll see Agents handle CMA requests

1)     One step approach

a.    That’s when they have basic details on the property in question and compile comparative information to bring along to the meeting. After a walk through they can then “fit” the property in to what they believe is the right place amongst the comparables 

2)    Two Step approach

a.    Walk through the property, go back to the office and compile the comparables and return at a later date to deliver their opinion

Neither approach is wrong.  Most good Realtors will discuss and explain their approach.

So let’s cut to the chase.  

Here you are with two or three CMAs in hand.  One is 100 pages long and one is one sheet long.  Which is right?  Which is better?  Well …. Neither. I know, you’re thinking … huh? An evaluation that’s light on data can perhaps be a Realtor that believes his charm gets your business.  An evaluation that’s too large can show either a lack of understanding of the market and the comparables OR it’s a baffle brains with bulls*t approach.  Therein lies the primary reason some Realtor can come up with slightly different evaluation numbers.  It’s not rocket science, but it’s not smoke and mirrors either. 

Numbers don’t lie, but interpretation of those numbers can be different.  Even two solid Realtors can deliver slightly different opinions, but odds are they are within a small range of each other.

So here’s a few things to keep in mind when “evaluating the evaluation”

Firstly, if you ever get a Realtor that will give you an evaluation over the phone, without ever seeing the property … run.  Run fast and run hard.  How on earth can you put a value on something that is unknown.  A good Realtor can give you a “ballpark” or range based on neighbourhood sales of similar properties, but a value on your specific property without a walk through? Not a chance.

So what DOES a good evaluation look like?

1)    A good evaluation looks at RECENT sales – not those from a year ago or even 6 months ago – markets change and sometimes within weeks.

2)    A good evaluation looks at the current market trends – Buyer’s market?  Seller’s market? Seasonality impact?

3)    A good evaluation looks at COMPARABLE properties – not bungalows compared to 2 storeys – they aren’t the same. 

4)    A good evaluation should be in the same neighbourhood (usually within a 2 km radius of the subject property).  Prices can vary significantly from one neighbourhood to another – 1200 sf condo in Yorkville versus 1200 sf condo in Etobicoke

5)     A good evaluation should contain ALL the comparables.  ** dirty little secret alert** - some agents will only show you those comparables they WANT you to see and what will support the price they are quoting.  It’s not unusual to have a sale that’s extremely low and a sale that is extremely high - there are always anomalies.  But what you want to be cognisant of is the “bulk” of the sales data.  

6)    A good evaluation makes reasonable conclusions – the exact same model of home on the same street that has hardwood throughout would most definitely be more desirable to buyers than that with orange shag carpet throughout

7)    A good evaluation takes into consideration the historical sales as well as what’s currently on the market. 90% of the evaluation is lent to properties that are sold – they were successful and are now a statistic; and 10% to what’s currently on the market because that’s what your property would be potentially competing against in the marketplace

8)    A good evaluation presents enough “evidence” to support the price.  Back to the Realtor with a sheet of paper with the three last sales on your street … he’s lazy.  Plain and simple.  Like the courts, an evaluation is the reasonable “argument” that Seller’s can make to support the asking price to a Buyer.  Have you ever walked into to a house for sale and think “WTH? They’re asking how much?”

The biggest temptation for Sellers is the Realtor that comes with “the highest number”.  We call that the “feel good number”.   ***dirty little secret alert*** Some agents will tell you the number that makes you “feel good” to get the listing. Trust me, he’s already got the price reduction speech rehearsed, or is happy to let the sign swing on your lawn as he garners Buyers for OTHER properties from the sign calls on YOUR listing.    So don’t be fooled by the “feel good” number.

There are many nuances involved when placing a value on a property. Things like location and condition.   It’s fair to say that a home with a new kitchen, new flooring, new windows, roof and furnace would garner a higher price than that same home with original everything.   So for those of you that believe the ONLINE “tell me my home’s value” programs that spit out a number after you enter your address are great (not “Zillow” mentioning any names “Zillow”)…. be aware that those programs have no ability to evaluate the quality of the property.  Ask yourself if you would you pay the same price for a Volkswagen as you would a Mercedes?   They’re both cars that have four wheels, an engine and a steering wheel ….That’s the same sort of logic with online “What’s my home worth”. 

In most markets and in most cases, CMAs are free of charge (some agents charge a nominal fee for their time to put the evaluation together, but that is rare).  Let’s face it, it’s the Realtor’s opportunity to get in front of potential Sellers and show their stuff.  Realtor’s only get paid if the house sells,  so keep in mind that many will tell you what you want to hear, not what’s reality.  The CMA is your first clue as to which pile they fall into.