Sometimes it’s not too hard to find the likely market value of a property: it might be a San Jose tract home where several similar homes, in similar conditions, on similar lot sizes, has sold recently.  Or, if not such a cookie-cutter property, it could be a “typical” type of house for a given part of Silicon Valley – a typical Cambrian area 3 bedroom, 2 bath house, for instance.

But sometimes, you have residential real estate that really is not too similar to others nearby.  It may have been custom built or remodeled to an extreme.  It might have an exceptional location or view.  Or perhaps it’s in a region where there is very low turnover, so no recent sales.

Estimating the probable buyer’s value with a unique home for sale in Silicon Valley is tricky but not impossible.  There may be no “good comps” within a mile, but there are homes that fill similar needs and that’s where you look.  We must put ourselves into the buyer’s shoes as much as possible. (more…)

Today I was chatting with my lender friend, Shashank Shekhar, who’s also a very active blogger and social media maven. We discussed a variety of topics, including how to price a home for sale and establishing the real estate market value of Silicon Valley homes.

Sometimes it can be tricky to estimate what a home might sell for or its market value.  I usually talk with my seller clients about trying to find the probable buyer’s value.  The seller may have a range of prices that he or she anticipates and would accept.  So too with the buyer, whose range will likely be lower than the seller’s.  The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.

Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000.  The buyer would like to purchase it for $960,000.  The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two.  If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.

But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.

What causes property values to go above or below what would seem to be the probable value?  Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
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