There are different methods of establishing real estate opinion of value: a real estate sales agent may assist the seller to establish a listing price based on a comparative market analysis (CMA) and should be established from objective data, which may include closed sales, pending sales and available listings. The Realtor must operate within the course and scope of their license. Fiduciary duties apply.
An appraiser will establish the opinion of value based upon the analysis of comparable closed sales. It will base the opinion of value conclusion of income-producing properties on the capitalization approach, replacement cost, and comparable sales. (Note Article on Capitalization rate)
Other valuation methods, which are purpose driven may include residual value method for new construction, insurable value for getting property insurance, value settlements for an estate, and assessed value for property taxation purposes.
When a realtor is approached by a prospective seller, the realtor will usually take the time to create a comparative market analysis. In this process the realtor will compare properties with similar characteristics and amenities that have sold, or are on the market for sale, to establish an estimated opinion of value for listing purposes. The seller and his/her agent will make a negotiated decision about the listing price based on multiple factors, including seller’s motivation, market conditions and general level of sophistication by all parties.
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