What gives your home it's value

What gives your home it's value?

Supply and demand which collectively go to form “the market”. The single most important issue
that influences the value of a property is the old cliché Location, Location, Location. This can be
demonstrated by the result of moving your home and placing it in the middle of Central Park in
New York. Without even tidying the front yard the price would be increased by several fold.
However there are other important issues that you should be aware of when considering the
value of property.

Market value is the most commonly used concept as it related directly to the process of marketing
property. It is defined as the most probable price, in terms of money, to which an informed buyer
and seller would agree, assuming that there are no undue pressures and the property is on the
open market for a reasonable length of time. In other words, it is a “willing seller and willing buyer”
transaction. It assumes both parties are fully aware of the market conditions and the potential
uses of the property as well as all the other features associated with it.

In order for a property to have market value, four basic elements must be present. They are:

Demand
The demand for an item might be based on an actual need or on a desire but demand becomes
a prerequisite to value only when the need or desire is accompanied by the ability to pay for the
item.
Utility
Utility is another essential element of value. An item must serve some purpose even if it is just to
give esthetic pleasure, for it to have market value.
Scarcity
Scarcity means that there is a short supply relative to the demand. It is the other side of the “Law
of supply and demand”. If there was an unlimited supply of an item, it would have no value. The
air we breathe, for instance, as important as it is, has no market value because scarcity is
missing.
Transferability
Transferability refers to the ability for ownership to be conveyed from one person to another with
relative ease. Unless ownership can be transferred, an item has no value. Land in the national
parks for example, has no market value because it lacks transferability.

The Competitive Market Analysis process - CMA
The process real estate professionals use to estimate the value of real estate is the Sale
Comparison Approach. This process estimates the value by comparing the property being
appraised(the subject property) with similar properties(comparables) up to five that have sold
recently under normal market conditions. This is based on the principles of substitution, which
provides that the value of a property tends to be set by the cost of buying an equally desirable
substitute. The ideal comparison would be the identical next door house that sold at arms length
yesterday. The name given to this comparison is a Competitive Market Analysis or CMA

Office - 770-844-0214 - Cell - 770-329-5269 - e-Mail Tony here

Remember a CMA is more of an art form than a science. It is a logical method of arriving at a
value for a property using historic data. It would be wise to reflect on the words of Albrecht Durer on his lifelong quest
to define beauty - "it's all in the eyes of the beholder". If all of our buying decisions were based on price then we we'd
all be driving identical cars which we evidently do not! Take a look at the three "identical" properties below and you'll
see that value wears a coat of many colors.