If you’re currently thinking about selling your home, among the most important pieces of information that will help you determine what you should price your home at is the value of your home. However, home value is a subjective metric that can be different for everyone. Your home is typically worth the amount of money that a prospective buyer will pay for it.
In most cases, the price a potential buyer will pay depends on the health of the surrounding real estate market. If the market is performing poorly, you can expect the current market value of your home to decrease. On the other hand, a strong market means that there will be a large number of buyers on the market, which should increase the current value of your home. Because of the significant decrease in real estate interest rates over the past year, home values have been rising substantially.
Understanding the value of your home is important if you want to list it at the right price. If you make the mistake of listing your home for a price that’s higher than the current value, it’s possible that very few buyers would make an offer on your home. This mistake could prove to be a costly one. If a home remains on the market for an extended period of time, it becomes significantly less appealing to prospective buyers. These buyers might start to think that something is wrong with the home, which means that you would likely need to reduce the price.
If you end up listing your home for much less than it’s worth, your profits would be lower than they should be. You should reevaluate your home’s value at least once every year. Keep in mind that there are many tools and techniques that you can use to determine the value of your home. This article offers a closer look at four of the most efficient methods that will help you ascertain your home’s current value.
The first thing you can do to determine the value of your home is to find an online valuation tool, of which there are many to select from. Over 20% of all U.S. homeowners used a simple online estimator to identify the current value of their homes. These tools are known as automatic valuation models and are available on many reputable sites. The top online valuation tools can be found at:
No matter which tool you use to identify the value of your home, you should be provided with accurate results. For most of these tools, all you need to do is enter your home address, after which you’ll be given an estimate of what your home is currently worth. Some tools may ask you additional questions about the type of home and when it was built before they send you the results through your email address.
While the aforementioned tools can be useful when calculating your home value, these tools aren’t always accurate. If you want to use a more accurate valuation tool, real estate professionals and mortgage lenders are considerably more accurate because of the “confidence score” that they use. This score tells you how close the tool believes the estimate is to your actual home value. If you receive a confidence score of 90%, this indicates that the estimate is within 10% of your home value.
Even though valuation tools with “confidence scores” are more accurate than the ones without, you should still speak with a real estate professional. Your real estate agent can provide you with more information about the valuation tool you ended up using. The main benefits of using valuation tools include:
The primary downsides to using an online valuation tool include:
The next thing you can do is obtain a comparative market analysis, which is among the most effective solutions available to you for determining home value. This type of analysis can be performed by your real estate agent. When a real estate agent completes a CMA, they focus on comparing recently sold homes to your home.
The factors that this analysis usually takes into account include square footage, amenities, neighborhood, age, style, and condition. The point of a comparative market analysis is to find homes that are similar to yours. However, these homes must have been sold in the last six months and need to be located nearby your home. The real estate agent who performs the analysis will then provide you with a report that includes their estimate of what your home value currently is.
Although a comparative market analysis isn’t as accurate as a home appraisal, it can help you arrive at a fair listing price. This analysis is important because it can be done before listing your home and doesn’t cost much. Most real estate agents charge very little or nothing at all to perform a CMA. If you happen to request a CMA from an agent that you have yet to hire, they may expect you to hire them in exchange for a free CMA.
The third step involves applying the house price index calculator to your home. This calculator was made by the Federal Housing Financial Agency and is available on their website. Even though this calculator functions just like an online valuation tool, it takes a more scientific and accurate approach to determining home value.
This tool uses a “repeat sales method” for calculating home value. It will track every time your home has been sold since the 1970’s to identify how much the home’s value changed between each sale. With this information, the tool can accurately estimate how much values fluctuated in a specific market.
Despite the general accuracy of this tool, it only looks at what are known as conforming home mortgages. The only mortgages that are counted are ones that are less than $822,000, which means that the tool isn’t ideal if your home is valued at more than $1 million. If you have a conventional and conforming loan, the house price index calculator is a great way to determine your home’s value.
The fourth and best solution for identifying the value of your home is to hire a professional appraiser. While an official appraisal must always be done during the closing process, you can still request one before your home has been placed on the market. Professional appraisers take numerous factors into account when arriving at an accurate estimate of your home’s value. These factors include:
All of this information is put together to create an estimate of your home’s value that should be more accurate than the estimates from any other home valuation technique. Once the professional appraiser has arrived at an estimate, they will write up and provide you with an official report.
Before you use one or more of these methods to determine the value of your home, there are three distinct types of home value that you should understand, which include the appraised value, the assessed value, and the fair market value. The appraised value is the value of your home as estimated by a professional appraiser before or after you’ve listed your home. Mortgage lenders will use this value to identify how much money a buyer can borrow.
As for the assessed value, this value is estimated for property tax purposes. A county or municipal tax assessor will look at the features of your home alongside features of comparable homes to determine your home’s assessed value. The valuation the tax assessor arrives at is typically lower than your home’s fair market value.
When looking specifically at the fair market value, this number refers to what the home is valued at when the seller and buyer understand the home’s features and condition but don’t have pressure to sell or buy. This is considered to be the most accurate measurement of a home’s value since it’s based entirely on current supply and demand in the market in question. Regardless of the methods you use, you should always estimate the value of your home before listing it on the market. The results of this estimate can help you make an informed decision on what your home will be priced at.
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