How much is my house really worth? This question may be on your mind if you are thinking of selling your home. You may be imagining the profit you will be making from the sale. Maybe you are trying to figure out how much you will need in order to pay off your mortgage and how much you will have left to use as a down payment on another house.
No matter why you are having these fantasies, know that you can estimate the value of your house in more ways than one. However, keep in mind that the real value is only what a potential buyer is willing to pay for your house.That said, you can use many approaches to get a pretty good idea of how much a potential buyer can pay for your property based on the current market conditions. Let’s look into it further:
The Wrong Ways To Evaluate a Home
As a homeowner, you may be confused by several different numbers that you may have heard of being used to figure out the value of a house. Let’s take a look at some of those.
Property Tax Assessment: In each jurisdiction, there is a formula in order to figure out the value of a house for tax assessment; however, know that this price has nothing to do with the current market value of your house. In other words, the present value of your property may be higher or lower than your tax assessment.
Homeowner’s Insurance: Actually, homeowner’s insurance value is figured out on the basis of the cost that may incur to replace your house, not the land. Therefore, the value of homeowner’s insurance is affected in comparison to the market value.
Mortgage Balance: This is the amount you owe at any time during your mortgage loan period, and it reflects your home loan. You can calculate your home equity by deducting your loan payment from the market value of your property.
The value of your neighbor’s home: While your neighbor’s house may look quite similar to yours, it can’t be 100% identical. You still need to consider a lot of other factors for an accurate estimate. Your real estate agent can help you with this based on the value of nearby properties and other important factors.
Purchase price of your house: No matter how long ago you bought your home, the price you paid won’t represent the current value of it. In fact, the present value of your house may be a lot higher or lower than it was when you bought it years ago.
Your Desired value: while you are free to put your house on the market with your desired price tag, know that it may not get sold for that price, as your desired value doesn’t represent the real value of your home. If the asking price is too high, your home will just stay on the market with no or very few offers.
Comparative Market Analysis (CMA)
If you work with a good real estate agent or realtor, they will carry out a comparative market analysis based on the latest market data in order to help you figure out the value of your home.
If you have decided to sell your home, the buyer’s lender will require an appraisal, meaning they will have to get an estimate of the current market value of your house. In the absence of appraisal, the buyer will have to bring more cash to buy your house at your desired price.
A CMA is based on data. Besides, you have to have local market knowledge so you can know which homes you should compare your home to. Price interpretation is another factor that will help you know the value of your home.
Most real estate agents look for similar houses that were sold in your area over the past 2 to 3 months. Apart from this, they will also take into account other homes that are on the market in addition to those homes that were removed from the market because they didn’t sell.
The realtor will compare your home with other homes based on a number of factors, such as the number of bedrooms, bathrooms, and the condition of your house. In addition, they will also consider the amenities in the neighborhood, such as schools, parks, and hospitals, to name a few. If you have no idea how the realtor is going to make the comparison, you may ask them to show you some of the houses that were recently put on the market. Alternatively, you can go to online property listing websites to see high quality photos of those properties.
In short, you may find it tempting to evaluate your house on your own and put it on the market to get it sold at your estimated price, but this may not be the best approach to sell your house at the best price possible. According to many studies, overpriced homes that stay on the market for a long time are sold at a much lower price in the end. So, it’s better to work with a good real estate agent to figure out the best market value of your property and then get it sold for top dollar.