5 Ways to Determine the Value of Your House
Selling your home is quite a journey. There are many things you have to consider to get the best deal possible. Everything from a real estate agent you hire to the online ad you create can make a huge difference.
However, before you even put your property on the market, you need to ensure you get the right listing price. It sounds like an easy thing to do, doesn’t it? Unfortunately, it’s much more complicated than most people think.
Why? Because many things can impact your house market value. Sometimes, even the smallest thing, like a faulty garage door spring, can affect the value. With that in mind, finding out how much your home is worth is not a process you should underestimate.
To make it easier for you, though, we’ve decided to help you. In the guide below, you’ll find all the most important information you need for an accurate home valuation.
What Impacts a Home Value?
As mentioned before, many things may impact your home’s current market value. Knowing more about them is crucial if you want to sell your home for the best price possible, so let’s take a look at them, shall we?
First of all, we have the location. Everything from your neighborhood, distance to amenities, roads, schools, etc., can make a difference when estimating how much your house is worth.
The second thing you need to consider during the valuation is your property’s size. Measure your square footage and, more importantly, your usable space. It’s not a surprise that buyers are willing to pay more for bigger homes. Don’t get too carried away, though.
Another thing that impacts the value of your home is, of course, its age and current state. Usually, older homes are cheaper, although if you’ve kept one in great shape and improved it with time, an estimated value can be quite significant.
Among other things that may impact your home value, we can name:
- The real estate market conditions
- Number of bedrooms and bathrooms
- Upgrades and updates (not all, though)
- Economic indicators, e.g., interest rates
- Property’s historical sale prices
How to Estimate the Value of Your Home?
Now that you know what might affect your home’s value let’s take a look at how you can estimate it before listing it for sale. We’ve decided to cover five, in our opinion, best ways for property valuation:
- Using online tools
- Working with real estate professionals
- Getting a CMA
- Using an index price calculator
- Evaluating comps
Use Online Tools
The popularity of online value estimators, also known as AVMs (automated valuation models), has grown significantly over the past few years. In fact, according to one survey, 22% of US homeowners use valuation websites to find out how much their home is worth.
Such tools analyze public records, like property taxes, location, recent sales, and listing prices in your area, to predict the home value. Using an online estimator can be a great way to get a general idea of your property’s worth.
However, keep in mind that they won’t provide you with a hundred percent accurate numbers. To get that, you need a more professional approach.
Hire a Professional Appraiser
Although a home appraisal is usually performed to determine whether you can get a mortgage, as a house owner, you can request it whenever you like. In fact, according to the survey mentioned before, 28% of US homeowners hire a professional appraiser to value their property.
However, an appraiser can determine more than just the home’s value. Depending on your needs, they can evaluate:
- The market where your home is located
- Property characteristics, including the land and improvements
- Comparable properties
Using all these factors, appraisers can provide you with the final opinion of the home’s value and deliver an official report.
Get a Comparative Market Analysis (CMA)
You can also estimate your house value by asking your local real estate agent for a CMA – comparative market analysis. It may not be as detailed as a professional appraisal, but it’s still more accurate than using an AVM.
Real estate agents usually perform a CMA for listing purposes for little or no cost at all. There’s a catch, though. Once you ask a realtor to estimate your home’s value, they might treat it as an invitation to further cooperation.
With that in mind, when you’re asking for a CMA, it’s best to choose an agent you want to work with further.
Use the FHFA House Index Price Calculator
Online AVMs are great, but if you want a more thorough analysis, you should consider using the Federal Housing Financing Agency’s house price index (HPI). It applies a more scientific approach, providing you with an exact value.
HPI uses the so-called “repeat sales method.” In short, it analyzes a home’s change in value from one sale to the next using the data on mortgage transactions the FHFA has been gathering since the 70s.
Then, it uses this information to estimate how home values fluctuate in a given market. However, as great as HPI is, it comes with two significant cons:
- It looks only at conforming home mortgages – less than $548,520 and more than $822,375 in high-cost areas.
- HPI doesn’t take into account seasonal changes or inflation.
Evaluate Comparable Homes
And last but not least, we have an evaluation through comparing similar homes, often referred to as comps. It’s the simplest, and therefore the most popular method among US homeowners, with more than half of them using it when determining their home’s value before selling.
The thing is, though, to compare the right houses. Not all recently sold homes in your area can be referred to as comps. Look at homes that have similar size, location, upgrades, age, and condition. In short, think about a house that a buyer would choose instead of yours.
To get your market value, look at recent home sales in your neighborhood. If there aren’t any, listing prices can serve as a benchmark. However, keep in mind that they might not be realistic.
As a rule of thumb, it’s always best to compare at least three comps to get the most specific sales price.
The Bottom Line
As you can see, evaluating your home’s value is crucial. It can be time-consuming, and it may require some effort, but done right, it will help you sell your home quickly and for the right price. Consider your options and try using more than one valuation method.
For instance, you can use an AVM to compare homes sold in your area that are similar to yours. Once you find out your home’s estimated value, you should seek help from real estate professionals to confirm whether your calculations are correct.
Doing that will ensure you sell your house for the right price and that you have more control over the process.