Sales Price vs. Fair Market Value

I often get asked “what is the value of my home?” I get asked this by people who may not have any intention of selling but still want to know what has happened to the value of their Northwoods’ investment. My standard answer is “it is what the buyer is willing and able to pay.” If that sounds evasive, it is because placing a value on a home is a tricky business these days.
First, we have to differentiate what is value. The two main types of valuation are the cost approach and the market approach. The cost approach simply looks at what it will cost to replace the home. A standard value for a basic home here in the Northwoods is $125/Sq. ft. This is for square footage above grade. This does not include upgrades such as hardwood floors, upgraded cabinets, countertops, etc. The other type of valuation is the market approach. This is what the market is willing to pay for your home. This approach is the most common type of valuation and it looks at homes recently sold, homes on the market at this time and homes that are no longer on the market (expired listings). There is little correlation between the cost of the home and the market value of the home.
The chart above is what lake homes sold for in the Eagle River area. It is looking at the price the home sold for versus what the town assessor believes the fair market value (FMV) is for the home. We have to break them down by township as there are different assessors in each of the townships. The assessor uses the market approach for valuation. You will note that the range varies quite a bit from 77.8% in Sugar Camp to 98.2% in Conover. Why the big difference? Generally it comes down to when the assessor last did a revaluation (re-assess).
If you have questions on the valuation process, I have been on both sides of this fence and will do my best to answer your questions.

Sincerely,
Jim Mulleady – Broker
Coldwell Banker Mulleady REALTORS
jim@28lakes.com http://www.28lakes.com

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About northwoodsdeals

Jim Mulleady is the Broker for Coldwell Banker Mulleady REALTORS located in Eagle River, WI. Jim has a BS in Industrial Technology from UW Stout and an MBA - Marketing from DePaul University. Jim has over 20 years of marketing and sales experience.
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