One of the key mistakes many people make, especially newbie real estate investors, is thinking they got a heck of a deal just because they purchase a property for less than list price.  Even back when we were in a robust market, it was very common to get 3-5% off of list price.  Don’t fall victim to confusing list price with actual property value.

In many cases, the list price is just a pie-in-the-sky price that the seller thinks he/she should get – or wishes to get – for their home.  It can often be overstated by a savvy listing agent giving susceptible home owners an inflated price in order to get the listing.

To get a more realistic value for a property, you need to look at 4 key areas.

1. Sold Comparables – What have other comparable properties in the area recently sold for?  This is by far the best way to value a property.   It’s best to stay within a neighborhood if possible, a mile radius, and only look at homes that have sold within the past 6  months.  You’ll need to look at similar homes in size, number of bedrooms and bathrooms, and overall lot size.  Also look to see what selling costs were paid by the seller to get the real net price.  Your local MLS is the best source of information for calculating comps.

2. Assessment Value - You can get this from the county tax records.   The assessment value is used to calculate county property taxes.  Historically this value was a % lower than actual market value.  The % is often consistent within a county or area.  However, with the recent decline in home values, this may no longer be the case as market prices are now often lower that assessment values.  You can get free access to county tax records at Netronline.com.

3. Online Comparable Sites. Let me say up front that these sites can be all over the board in values.  Here are four sites I look at.  Zillow.com , Eppraisal.com,  CyberHomes.com and  RealEstate.com.

Eppraisal will actually show the Zillow and CyberHomes values if available so I always start there first.  I take the average of these four sites.    These values are not a good as sold comps but is a good indicator.  KEYPOINT:  Everyone goes to these sites (including your buyers) looking for values so I strongly suggest you have an idea what these sites say your house is worth.

4. Rent - What is the cash flow of the property in regards to rent prices in the area.  You can go to sites such as these to get comparable rent prices for an area.  My favorite three are RentSlicer.com,  Zilpy.com and  RentOMeter.com.

Access to the MLS is key in getting accurate market values.  If you do not have access to your local MLS service, here are four suggestions.

1. Get to know a Realtor (or two) that will look up information for you.
2. Get to know a Realtor REAL WELL and they may offer you access. (They’re not suppose to do this so be real careful here.)
3. Marry a Realtor.
4. Get your real estate license.

While the listed price will give you an idea of current competition as you go to sell, you need to work off of actually solds for market value.

Do your homework and your own analysis to make sure you know what you’re buying.  Listing Price is nice but list doesn’t cut it in making sure you’re getting a good deal.

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