Price— it is the most important factor when buying or selling a house. Every property is sellable if it is priced properly. If a property is priced too high, it will turn off other potential buyers and the house will end up listed on the market for a while. This is not good as research shows that the longer time a property sells, the lower the final selling price will be. Home sellers need to get that balance of trying to get as much as they can but still price their property at fair market price to be able to sell it at a reasonable time. Home buyers, on the other hand, want the lowest price they can get, avoid overbidding, and leave less money on the table for sellers.
So how do we correctly estimate the value of a property? There are a lot of ways to know how much a property is worth, each method using different calculations and factoring in characteristics of the properties such as the location, living area, construction year, number of rooms, inclusions (pool, terrace, veranda), proximity to schools, shopping area, public transportation, current market condition (buyer’s/seller’s market), city migration, and many many more. You can do comparative market analysis, calculate according to the price per square meter, have a professional do the estimation, or use online estimation tools. One of the best online platforms for estimating the price of Canadian real estate is HouseSigma.
HouseSigma: leading AI Tech for automated Canadian home valuation
According to their website, “HouseSigma is a leading technology platform that utilizes artificial intelligence technology to correctly estimate Canadian home values in real time. With one click, home buyers can obtain an accurate automated home valuation for every listing within seconds. The HouseSigma algorithm also correctly identifies similar nearby sold properties to help buyers determine their final offer price!”
CEO, Joseph Zeng, shares that “HouseSigma believes with better data potential homebuyers and sellers can make better decisions when it comes to buying and selling their home,” that is why they utilize over 18 years of sales record in Great Toronto Area, Great Vancouver Area, Ottawa & Ontario (from 2003 to present) to develop their algorithms to come up with the most precise home valuation for users.
With HouseSigma, you can:
- Get a good home valuation approximation for every listing.
- Check the final selling price for houses sold to help buyers determine their final offer price.
- See potential rents for investment properties and the expected rate of return.
- See and drill down market trends per city, per community, and even per property type.
- Check their prices and demand reports and real estate blog for a market overview.
HouseSigma provides you with a great deal of information you need when it comes to real estate. With its simple interface, you can easily browse property values (past and present), view current listings (for sale or lease), previous listings (sold, rented, terminated), along with property details like listing history, facts about the house, home value, comparable sold homes, community stats, and demographics. It has helpful tools like a mortgage calculator, cash flow analysis, and a handy sidebar for scheduling a tour with a HouseSigma Agent. Compared with other online tools like Zoocasa, HouseSigma offers more comprehensive information at just a click. You can watch listings and receive notifications when they are sold and even when there are new listings to your preference on the market.
With HouseSigma, you don’t need to contact and pay a real estate agent to give you all this information.
Creating a HouseSigma account is free and easy, and you can use either your email or mobile number to sign-up. It is available as a mobile app in the App Store for Apple devices and on Google Play for Android, and online at housesigma.com.
The Comparable Sales Approach Simplified
The sales comparison approach or comparative market analysis (CMA) is a method of assessing property value by analyzing similar properties that have recently sold to establish the true market value of a certain property. This method is often used by real estate investors and appraisers where the “art” or subjectivity is finding the right comparables and putting value in its difference to the subject property. It is advisable to do this kind of manual approach as automated valuation models can be inaccurate at times.
To do this, first you need to select recent sales that are similar to the subject property. It is ideal for the comparable properties to be in the same neighborhood and price range, but they don’t need to be exactly the same in terms of lot size, number of bedrooms, and property age. Usually, three to five comparable property sales are used in the analysis.
The next thing to do is to make adjustments for the comparable sales to reflect the time, conditions, and differences with the subject property. Property Metrics lists nine categories where the price difference can fall under:
- Ownership Interest – fee simple interest vs. leased fee interest
- Cash Equivalency
- Conditions of Sale
- Market Conditions – buyer’s market vs seller’s market
- Locational Characteristics – location-specific factors like transportation, traffic patterns, school quality, shopping availability, and access to adequate utilities
- Physical Characteristics – age, condition, quality, design, and features
- Economic Characteristics – operating expenses or management expenses
- Non-realty Components of Value – the sale may include furnishings or other items of personal property, intellectual property, or on-going business value
Finally, we set the prices for these adjustments, with the goal of making the comparable properties look like the subject property. This is a subjective process and having knowledge and experience in real estate makes it more accurate.
Doing a simple comparison sales analysis is possible with the information you can get from HouseSigma. Depending on the listing, you can get the building size, lot size, building age, features and highlights in the Property Key Facts and Details. Check out the Sold Comparable section to get other comparable properties. Although HouseSigma is limited in that it doesn’t show exact property size, condition or features, it is still a great tool for a quick estimate and is very useful especially when you are considering your options or are early in the mortgage application or property buying/selling process.
Below is a simple example of a comparable sales approach done in Excel:
|Factors:||Subject property||Comp 1||Comp 2||Comp 3|
|Size||2630 feet²||4300 feet²||2500 feet²||3500 feet²|
|Time of Sale||0.58||0.42||0.25|
|Time of Sale||$420,000||$300,000||$180,000|
|Adjusted Sales Price||$3,245,000||$2,125,000||$3,141,000|
|Adjusted Sales price per sq ft||$754.65||$850.00||$897.43|
|Ave Sales Price per sq ft||$834.03|
When to use other valuation methods
When you are seriously looking to buy or sell a property, or getting a mortgage, a more robust method of valuation is required. Buying a house is usually the largest transaction a person will make in their entire life; you would want to make sure you are buying it or it is being sold at a fair price. Additionally, mortgage lenders will use statistical software such as Purview (Automatic Valuation Model) to estimate the house value using statistical analysis on local sold property data. If the mortgage request is deemed “High-Risk” every mortgage lender will insist on an appraisal. The appraisal is required to enforce the lender’s insurance policies, so every major lender will require this. Having the home appraised by a professional also protects the potential buyer from paying too much for a property, as well as to protect the bank from financing a property that is worth less than the amount it invests in.
Creating an account:
Signed in screen:
In the welcome screen they show Sold below selling prices, High return properties, Featured listings, Just sold properties, Best for rental investment, Best for schools, 1 year price growth, and the GTA statistics.
Cusomizing your preference:
Information on specific property listing: