When you’re getting ready to sell your own home, the first thing you want to know is, “How much is my home worth?” It’s a critical question every For Sale By Owner seller must ask when determining their asking price.
Without a clear understanding of what your home is worth, you run the risk of pricing it too low and having it sell for less than it’s worth. Or, even worse, you could overestimate its value, deter potential buyers from viewing it and cause it to sit on the market, growing stale.
Getting an accurate valuation of your property is the first step to ensuring that you price it well enough to sell. Instead of estimating the value of your home, learn what your home valuation is based on and what you need to do in order to answer that agonizing question, “What is my home worth?”
The reason it’s so difficult to determine how much your home is worth is that its true value is a complicated equation based on many varying factors. Individuals who are trained to value a property accurately use their knowledge to evaluate not only the size, features and condition of your home but also market conditions, including local supply and buyer demand.
Home valuations take into account:
While there are a number of ways to figure out how much your house is worth, don’t expect all of them to land at the same answer. If you ask different sources what the value of your home is, you’re likely to receive different answers. The reason for the disparity is that home valuations are based on opinion.
Given all the factors that need to be weighed to determine a home’s worth, it’s impossible to provide an entirely objective valuation because it’s based on opinion. You may think that the home value calculators that you find online are objective, but even computers have their flaws.
At the end of the day, the actual value of your home is based on the market value, which is whatever someone is willing to pay for it. So, it’s essential to understand how each home valuation method determines how much your home is worth because you can use that knowledge to help you price your home correctly.
Websites like Zillow, Redfin, RE/MAX and Realtor.com offer to answer the question, “how much is my home worth,” with a simple click of a button. Despite how easy it may seem to use these free home estimators to determine the value of your home, you need to be careful with these online tools.
Home value websites can provide inaccurate estimates that will lead you to price your home incorrectly and lose out on a lot of money. These free home estimators just use algorithms to guess at your home’s value based on recent sales in the area and property tax assessments. That’s why the only thing they require to provide you with a home value estimate is your home address.
However, just because home value websites don’t provide accurate valuations doesn’t mean you shouldn’t try them. They can be a good starting point because they provide basic information. Just make sure you don’t base your asking price on the answer you find online.
In your search to find an accurate valuation of your home, the next step is to review the comparable sales in your neighborhood. Although home value websites pull some of this data when calculating the estimated value of your home, it is useful to do this work yourself as you have a better understanding of which properties are actually comparable.
However, when considering comps, you need to try to remain as objective as possible. Your home may seem superior to you, but your goal is to evaluate properties in the same way a potential buyer would.
To begin, that means the comparable sales you look at should be the properties a potential buyer would consider along with yours. When selecting properties, look for homes that are similar in their location, square footage, rooms and condition.
Unfortunately, only real estate professionals have access to your local Multiple Listing Service, a resource that lists all homes that are currently listed or have recently sold in the area. However, there are a number of websites that enable you to view MLS listings.
By going through these websites, you can find the purchasing prices of comparable homes that have recently sold in your area. The more comps you are able to find, the more accurate your valuation will be. Just make sure you are basing your valuation on at least three comps.
After finding the comparable sales, you have to evaluate the purchasing prices to determine how much your home is worth. While some people choose to estimate their home’s value by averaging the prices of all comparable sales, that strategy is not going to give you an accurate valuation. You need to adjust the prices based on the differences between your home and the comparable properties.
Remember, two houses are rarely the same. So, if a comparable sale has one more bedroom than your home, you would have to subtract that value from your own home. And that’s where the process gets really challenging, because in order to deduct the value of a bedroom, you need to know how much an extra bedroom is worth in the current market.
While you could try to figure out the value based on more comparable sales, you would have to do the same with each difference you find. That is why most sellers ultimately look to real estate professionals to help them determine what their home is worth.
Another option for answering “what is my home worth” is to get the opinion of a real estate broker. Getting a broker price opinion is a useful way to overcome any issues you have adjusting the purchasing price of comparable sales.
While a BPO is not considered an official appraised value, a real estate broker will provide you with a more accurate home valuation than you are likely to obtain on your own. To evaluate the value of your home, a real estate broker will examine both the interior and exterior of your home and determine a price based on comparable sales, comparable listings and market trends.
You will have to pay a fee to obtain a BPO, but it’s usually about half of what an appraisal costs. If a broker offers to do a BPO for free, make sure that the broker knows you’re an FSBO seller. It’s necessary to tell brokers that you plan to sell your property independently because some will try to use this “free” service to persuade you to list your property with them.
The most accurate home valuations tend to come from professional appraisers. As with BPOs, the home valuation that you receive will be the appraiser’s unbiased opinion of your home’s worth, but the process by which the appraiser arrives at that opinion is often more rigorous.
When estimating the value of your home, appraisers, like real estate brokers, will consider the trends in the market and comparable properties that have sold and been listed recently. But appraisers will also research public records, gain further information about the value of your neighborhood and complete a far more thorough inspection of your home, which is why appraisals tend to be more accurate than BPOs.
When deciding whether you want your home to be appraised, you should factor in the cost. A home appraisal tends to run $300-$400.
If you’re using the appraisal to help you price your home before you put it on the market, you should also be aware that this will not be the only appraisal completed on your home. Once you receive an offer, any lender who finances the buyer will insist that another appraisal be completed. So, just because your appraiser says your home is worth one price doesn’t necessarily mean that their appraiser will agree.
Believe it or not, you can actually maximize your home’s valuation by taking steps to prepare for your home appraisal. Before you schedule an appraisal, walk around your property and through the interior of your house and write down all the upgrades and improvements you’ve made. Have you added a new water heater, repaired the foundation, renovated the kitchen? Anything you’ve done to enhance your property should be added to the list and given to the appraiser.
But, once you’re done, walk through it all again. This time, jot down all of the upgrades and improvements that still need to be made. How’s your property’s curb appeal? Is the paint peeling, your lawn overgrown, your gutters clogged? Is your roof leaking, your thermostat malfunctioning, your handrail loose? Turn on your appliances. Are they all in working order?
Any damage that the appraiser finds will detract from your home’s value. So, before the appraiser comes, you want to make all the repairs that your budget allows. Even if all you can afford to do is add a fresh coat of paint, trim your trees and fix a leaky faucet, you should do it. Fix all minor repairs and try to attack as many of the more significant problems as you can.
Appraisers are influenced by everything they see, which also means that you should spruce up your place ahead of time. Make sure all areas of your property are accessible to the appraiser. Appraisers look everywhere, so remove any boxes that may be in the way of inspecting your attic, basement and crawl spaces.
Deep clean and declutter your home because even though your home valuation is not determined by your housekeeping skills, the cleanliness of your home will make an impression. And you can’t afford for any part of your home to make a bad impression. Remember, your home valuation is based on the appraiser’s opinion.
