Figuring out what to offer for a property can be tricky - it could be the difference between your offer being accepted or not.

Most real estate agents will provide you with a competitive market analysis (CMA), but you can put together a basic one on your own. With this guide, we'll walk through how value a home to give you a solid foundation before you make an offer.

Where do I start?

Property valuation is based on two main factors:

1. Comparable properties, a.k.a. “comps”, looks at similar properties in the area to how they are valued.
2. Market conditions considers forces such as supply vs. demand, interest rates, and buyer/seller sentiment.

To figure out how much you want to offer for a house you like, start by finding homes that have recently sold that are similar. These are your comps. We can find a starting point by triangulating the value of the house based on these comps.

After this, we need adjust the value based on market conditions, which can affect whether or not the seller might be expecting a higher offer or may take less than their listing price. Let's jump in.

How to compare properties

Prices for sold houses are a much better picture of house valuations than listings, and they're all in the public record regardless of whether they were sold via agents or directly by owners. You can pull this data from your county's records, but it's usually also available via Zillow, Redfin, and other real estate marketplaces. We'll use Zillow for now.

1. First, run a search of your area on Zillow (the closer it is to your house, the better). Use filters to find houses that match on as many of these criteria as possible:
   • Location
   • # bedrooms
   • # bathrooms
   • House size (sq. ft.)
   • Lot size (sq. ft.)
2. Try to find at least 3 houses that are reasonably similar (in a very active market, make sure these are from the last month; otherwise the last ~6 months is fine). Put their info on a spreadsheet so you can more easily keep track of it, along with their sale date and price.
3. Add any additional info about major differences you can find. Some examples might include:
   • Landscaping - is the curb appeal significantly better?
   • Kitchen - recently remodeled? Better appliances?
   • Flooring - carpet, hardwood, tile? Old & worn, or new?
   • Bathrooms - recently remodeled?
   • Additional space - are there more rooms or offices?
4. Now take these homes and compare them to the one you're looking at. Is it in better condition than most of the ones that sold recently? Does it have as many extra features? Does it include significantly more or less room or land?

Based on these comparisons, you can determine whether the house you're looking at should be around the same range as the previously sold houses, higher, or lower. This guide can help you value specific differences more accurately, but note that it can range from market to market.

Now that you have a starting point for the value of your home, it's time to consider market conditions.

Consider market conditions

The main thing to figure out is whether your house is in a buyer's (more supply than demand, and buyers have power) or seller's market (more demand than supply, and sellers have power). In a buyer's market, more modest offers still have a chance of being accepted, and sellers may be more willing to negotiate and offer concessions. In a seller's market, lowball offers usually won't even be considered, and many buyers will begin waiving contingencies and offer all-cash or expedited closing to make their offers more compelling.

Here are a few things you can look at do get an idea of market conditions: 

• Available inventory: a lot of available inventory often means it's a buyer's market, while a low amount of available inventory points to a seller's market
• Average time homes are on the market: if homes are on the market for a long time (3+ weeks) without being sold, then it may be a buyer's market
• Number of offers per home: if open houses are packed and every home is receiving several competitive offers, it's probably a seller's market
• Interest rates: higher interest rates mean higher mortgages, which can mean fewer buyers wanting to purchase homes. Lower demand with constant supply means sellers might have difficulty selling and take less for their property.
• Regional economy: if the regional economy is booming (ex. new businesses are opening, lots of investment pouring into the area), it will often lead to home price increases as more people move in and the demand for homes increases.

Once you have a read on market conditions, you can figure out whether you need adjust your original valuation - if it's a hot seller's market, homes will often end up selling for above the price they're listed at. This means you can expect your target home to end up selling for more than comps would suggest. Recent sales can still be effective since many will report the actual price the home sold at, which will account for any difference from listing price. In a buyer's market, the comps should provide a fairly good baseline price.