Determining home value is something that depends on a number of things. Ultimately, you are the one that will determine the value of your home.
Your home’s market value is how much a buyer would pay for your home under normal selling conditions. Whether you are working with a realtor or trying to do this on your own, you’ll want to consider many factors, including its location, interior and exterior characteristics, and the supply and demand in your area.
What Is Market Value?
Market value is a term that refers to the the most likely price that a property would sell for in a fair market.
In other words, how much a buyer would pay for it under normal circumstances.
The market value isn’t a number set in stone.
It can vary depending on who it is that is determining that number.
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The Role That Realtors Play
Realtors can help you determine what they think is fair market value for your home.
They do this by using comparables.
Comparables are properties that are similar to yours that have sold within the past 90 days in your area. Things they will look for to find comparables are:
- Square footage – they will look for a home with a square footage that is close to yours
- Number of bedrooms – they will look for a home that has the same number of bedrooms as yours
- Bathrooms – they will look for a home with the same number of bathrooms as yours
- Lot Size – they will also try to find a home with a lot that is similar in size as yours
Using the sale prices of the comparables they come up with, your realtor will then come up with their determination of your market value by averaging them.
When selecting a realtor, it’s important to look for someone with a good level of expertise.
Lots of realtors work part time and have low sales and listings.
They may know the basics but a realtor that has a lot of sales under their belt has the experience to help you weed through the information and answer any questions that you have about price.
County Assessors
While a good realtor can help you find the market value of your home, this shouldn’t be confused with the assessed value determined by a county assessor or other municipal entity.
All homeowners in the US are more than familiar with property taxes.
The amount of property taxes that you pay are based on the assessed value of your home that is determined by a county assessor.
Some items that assessors consider when determining value are:
- Comparables – Yes. Comparables come into play when determining assessed value too. The assessor will look at comparables in your area and what they are selling for.
- Improvements – If the assessor determines that any improvements were made to your property since the last time it was assessed, their number for value will likely increase. Improvements could be anything from a new garage, a room addition, building a deck, new HVAC, etc.
- Replacement Cost – The current cost to replace your home if disaster were to strike is also often taken into consideration.
These and sometimes other factors are used to come up with a number, and then that number is multiplied by a uniform percentage to come up with your assessed value that is the taxable amount.
Higher assessed values here mean higher property taxes.
How Do Market Value and Assessed Value Affect What Your Home Sells For?
Assessed values are typically lower than your home’s actual market value.
If a buyer is savvy and knows they can look up values at their local county assessor’s website (this is public information), and your assessed value is say $215,000 but you’re asking $240,000, they might come forward wondering why the price difference.
Sometimes county assessors don’t update a property’s value for long stretches.
In these cases, this can lead to an extremely low figure when it comes to assessed value.
While that is great for your pocketbook, it doesn’t look so great to buyers at first glance, however, the date it was last assessed should be available as well.
On the flip side, if you list your home at $150,000 and the assessed value is $145,000, you can use that to your advantage if a potential buyer is questioning your price tag.
How Do You Determine Your Market Value Without A Realtor?
Let’s say you don’t want to sell but want to figure out what your home’s market value is.
Knowing your home’s value is a great piece of information to have even if you aren’t selling.
Professional Appraisers
Typical mortgage transactions require a home appraisal from a trained professional.
But you don’t have to be in the process of buying a house in order to hire one.
Professional appraisers can provide their services to a homeowner at any time.
They look at similar things a realtor would look at, but sometimes in more detail:
- Your Home Itself – The inside and outside of the home, any recent improvements, the state of the HVAC, electrical, plumbing, etc. They will also look at your land and anything on it.
- Location – They will consider the current market in your location
- Comparables – Again, comparables are used by professional appraisers as well.
Online Tools
The internet is full of home value estimators.
The technical name for these estimators is automated valuation model.
You’ll likely see them referred to as AVMs.
Like everything on the internet, some of the results you find are great quality while others… not so much.
- Look for AVMs offered by real estate sites like Zillow
- Look for results offered on mortgage lender sites
Even then, use caution.
While real estate sites will give you results they might not have enough data to pull from for that result to be highly accurate.
With mortgage lenders AVMs, you usually get a value as well with a confidence score.
The higher the confidence score, the more likely it is to be close to accurate in regards to your home’s current market value.
Comparables
You keep hearing about comparables, but they really do provide invaluable information about how much your home is going to draw on the market.
When looking for comparables to determine your value, remember you are trying to find homes that include not just one but all of the following:
- Look for properties similar in square footage
- Look for properties in the same neighborhood
- Look for homes with similar improvements or upgrades
- Look for homes that seem to be in similar condition to yours
You need at least three comps to look at in order to come up with an accurate value.
A site that shows MLS listings is needed in order to find similar properties and their recent sale prices.
If you can’t find enough comps that have sold, look for ones that are still for sale, but remember that sometimes listing prices can be inflated.
After finding your comps, you’ll need to tweak them for any differences like an additional bedroom or take away value for outdated decor, etc.
When you’ve done this, you’ll then add the amounts together and then divide by the number of them you used in order to determine their average, and in such, your market value.
Conclusion
There are many factors that are considered when determining the value of a home.
It’s important to know your home’s value when you are preparing to sell, for insurance purposes, if you need to refinance, and also when looking at property taxes.
You can use the help of a realtor, hire an appraiser, or use any number of online tools by yourself.
Determining your home’s value is ultimately in your hands.