The practice of home pricing requires finding similar recently sold homes, looking at photos of those homes, determining your PPSF and then comparing the price per square foot and the level of finish to the home you are pricing.
What constitutes similar homes? One general rule of thumb is to limit your comparisons to homes that have a similar number of beds and bathrooms, lot sizes, and a square footage that is within 10-15% of the subject home. If you are comparing condos, you want to be within the same building ideally. For single family homes, you will want to stick to nearby homes in the same neighborhood or area. Next, you start looking at the photographs for each of these sold home and benchmark the level of finish across key features compared to the subject home. At the end of the exercise, you’ll determine the price per square foot (PPSF) for each sold home by dividing the price by the size. For each of those PPSF numbers, you’ll want to make a determination that home you are pricing is nicer or less nice than each data point. As you continue to compare data points, you should see a story starting to emerge that supports a price from the PPSF data.
While the pricing summary is short, the research and time needed to get comfortable with the determinations can take some time, and accurate pricing is an art to get right. So, do not rush a home valuation. Home sellers may need to spend a few hours or even days to properly review the data and get comfortable with a price if they want to truly get within 1-2% of the actual present market value. The best thing you can do is make a simple spreadsheet with links to the sold photos and price per square foot calculations.
Generating accurate prices for homes requires getting familiar with the PPSF which is the key metric that demonstrates what buyers have paid for in terms of level of finish in that area. Fortunately home sellers are familiar with their own home and can accurately make comparisons to photos of similar sold homes. Buyers often have less information if they have not been in the home, but they can still generate quite accurate value estimates from photos or 3D models.
Sometimes it can be hard to find recent sales or photos of sold homes. The best place to get this information is from the MLS and many public websites such as Redfin allow you to see this information if your set up an account. Zillow also publishes a number of sold photos. And if those photos are not available then you may have some luck with a search engine query on the address. If you can’t get these photos online yourself, then you’ll need to talk to real estate agents or get into the homes yourself to make accurate comparisons.
The reality is that real estate brokers price homes using PPSF. Homeowners should do their own pricing because AVM’s are off and traditional brokers often recommend under-pricing