June 25, 2018
The single most popular question for any home owner is most likely “What is my home worth”? We always want to know that our investment is growing and doing well, and the answer to that question is never more important than when we are thinking of putting that home up for sale.
Tracking that value has never been so easy, thanks to all the online information available with just a few clicks of the keyboard. But are those online valuations trustworthy?
Mostly, the answer to that question is the same as how trustworthy are the online credit score trackers. That answer is – not so much.
The reason is pretty simple too. Automated data lacks the personal touch that provides accurate, intimate details that substantially effect the outcome.
Those “zestimates” and other online valuations aren’t bad for tracking the approximate worth on the open market at any given time, however, when you are ready to put an actual price tag on your house, the most accurate valuation will be done through an appraisal, which determines the market value of your house in the present day conditions of the real estate marketplace.
This break down of how reaching a valuation occurs can help you understand the process better and prepare more accurately for your home sale. There are two basic methods most appraisers use:
- REPRODUCTION COST. An appraiser evaluates the current condition of your home to determine how much it would cost to reproduce or replicate the home given today’s market conditions. Appraisers take many things into account including workmanship and material costs.
- SALES COMPARISON APPROACH. To come up with the market value of your home, the appraiser will measure the exterior walls to determine square footage of the heated and cooled portions of your home. Homes with a finished area (heated or cooled) in the basement or homes with a second floor will be measured from the inside. Next, the appraiser will take a tour through your home, making note of all the amenities including fireplaces, insulated windows, garages, pools, and porches or decks.
Next, they will find at least three comparable properties in your neighborhood that have sold within the past six to 12 months. Comparable means they are similar in age, size, design, construction quality, and amenities. Rarely do the homes match up perfectly, so the appraiser takes this into account, making adjustments along the way.
There is a limit to the number of adjustments an appraiser can make, which is why the appraiser will search in the next closest neighborhood if there aren’t any homes that are comparable in your neighborhood.
Once the appraiser has made all the adjustments, they weigh the differences in each property versus the soon-to-be listed home and determine a fair market value. This sales comparison approach is the most widely used method.
In a case where there is disagreement between the seller, the agent, and an appraiser as to the market value of the home, the comparison method allows an agent representing the seller to present evidence that can change the outcome of the appraisal. There may be information the appraiser was unaware of that determines a different outcome about the fair market value.
Since it is important to price the home right from the start, your local marketing specialist will usually provide a comparable report to assist in determining a range for your asking price.
Motivated buyers will always choose the home that has the best price for the amount of home. If you want to determine what the price range for your home in today’s marketplace would be, a Comparable Market Analysis can be helpful. Click, call or email us for specific information.