Conjecture vs Analysis in Home Pricing

Sometimes, determining the market value of a home is quite straightforward, such as in this recent example....

• Buyer A paid $250K for a 3 BR, 2 BA, 1800 SF, circa 2000 home
• Buyer B paid $255K for a 3 BR, 2 BA, 1850 SF, circa 2001 home
• Buyer C paid $245K for a 3 BR, 2 BA, 1750 SF, circa 1998 home

When you then are considering the value of a 3 BR, 2 BA, 1800 SF, circa 2000 home -- it would seem reasonable to think that you'd likely pay between $245K and $255K.  Multiple comparable sales point very specifically to that value based on a high degree of similarity between the comparable sales and the subject property.

Sometimes, however, it's not as straightforward. 

Conjecture - an opinion or conclusion formed on the basis of incomplete information.

Sometimes, we're going to identify a few sales of homes that are not so similar to your home, but which we understand a buyer would see as inferior to your home. 

And then we might point to a few other sales of homes that are, again, no so similar to your home, but which we understand a buyer would see as being superior to your home.

And then we might average the sales prices of the first set of homes, average the sales prices of the second set of homes, and start talking about the value range between those two average sales prices -- to see where, in that range, we believe your home falls.  Is it going to be seen as having a more similar value to the first set of properties, or the second set of properties, etc.

At the end of the day, pricing a home is a conversation, based on data, to come to our best, clearest and most complete understanding (guess) as to what a buyer is going to be willing to pay for your home.

Sometimes this conversation is a reassuringly precise exercise -- sometimes, not so much.