Recently I’ve come across a few transactions in which people where over paying to purchase real estate. I wanted to take a moment to discuss how I value real estate for single family homes.

Days on Market and Median Price

When you’re purchasing or selling real estate each property is unique. The unique qualities can increase or decrease the demand for a property. However, the price range for a property will generally hover around the median price for a local market. For example, let’s look at the two very popular metrics in real estate, days on market and median price for single family homes over the last 12 months (see charts). Days on Market and Price are both good indicators for demand. If a property is properly priced for the area it should sell around the median days on market. After getting an idea of the local market you need to dive deeper to get the specific comparable properties.

Comparable Market Analysis

Comparable properties are sold homes within the last 6-12 months within .25-.5 mi with the same number of bedrooms, number of bathrooms, similar zoning, similar lot size, and similar quality. If you don’t have this information you can’t make an informed decision about the price of the property.

Redfin and Zillow Estimates

Redfin and Zillow both offer estimates of value. Recently while doing a CMA for a property the average difference between the Zillow Estate and the Sold price for 10 properties was 14%! That’s $70k on a $500k home. In Los Angeles don't use Zillow or Redfin estimates by themselves.