It’s easy to look up how much money you have
in your savings account or the real-time value of your stock investments. But
determining the dollar value of a home is trickier.
As a seller, knowing your home’s worth helps
you price it correctly when you put it up for sale. If you price it too high,
it may sit on the market. But price it too low and you may be losing out on a
good chunk of money (nobody wants that!). For buyers, it’s important to know a
home’s worth before you make an offer. You want your offer to be competitive,
but you don’t want to overpay for the property.
Even if you’re not a buyer or seller right
now, as a current homeowner you might just be curious about the value of your
home. Keeping track of your home’s worth year over year helps you understand
the trends in your market. So when you are ready to sell, you can take
advantage of a good window of opportunity.
The good news is, a trained real estate
agent—who understands the nuances of your particular neighborhood—can determine
the true market value of your property … and
at no cost to you!
THREE TYPES OF HOME VALUES
When you start the process of buying or
selling a home, you’ll frequently hear the words appraised value, assessed
value, and true market value. It’s important to know the difference between
each one so you can make better, informed decisions.
A professional appraiser is in charge of
determining the appraised value of a home. These appraisals are typically
required by a lender when a buyer is financing the property. And while the
lender is the one requiring this information, the appraiser does not work for the lender.1 Your
appraiser should be an objective, licensed professional who doesn’t have
allegiance to the buyer, seller, or lender—no matter who is paying their fee.
The number the appraiser comes up with (the
appraised value) assures the lender that the buyer is not overpaying for the
property. For example, imagine a seller lists a home for $400,000. They reach a
deal with the buyer to sell the home for $375,000. However, if an appraiser
evaluates the property and determines that the appraised value is actually
$325,000, then the lender will not lend for an amount higher than that
appraised value of $325,000.2
When figuring out this number, an appraiser
will compare the property to similar homes in your neighborhood, and they’ll
evaluate factors such as location, square footage, appliances, upgrades,
improvements, and the interior and exterior of the home.
The assessed value of a home is determined by
your local municipal property assessor. This value matters when your county
calculates property taxes each year. The lower your assessed value, the less
property tax you’ll pay.3
To come up with this value, your assessor will
evaluate what comparable homes in the neighborhood have sold for, the size of
your home, age, overall condition, and any improvements or upgrades that have
been made. However, most assessors don’t have full access to your home, so
their information is limited.
Assessments are done annually to determine how
much property tax you owe. Many counties use a multiplier (typically between
60%-80%) to calculate the final assessed value. So, if the assessor determines
that the value of the home is $300,000, but the county uses a 70% multiplier,
the assessed value of the home would be $210,000 for tax purposes.4
If your assessed value isn’t as high as you
envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of
a lower valuation so that they can save money on property taxes. If you’re
interested in appealing your property tax assessment, let us know. We offer
complimentary assistance and would be happy to help you build your case.
True market value is established by your real
estate agent. It basically refers to the value that a buyer is willing to pay
for the property. A good real estate agent is an expert in determining true
market value because they have hands-on experience buying and selling
properties. They understand the mindsets of buyers in your market and know what
they’ll pay for a desirable house, townhouse, or condo.
As a seller, knowing your true market value is
important because it helps you choose how much to list your property for. It
can also help you decide if you want to make any improvements to your home
before putting it on the market. Your agent can help you figure out which
updates and upgrades will have the biggest impact on your true market value.
THE DEAL WITH ONLINE CALCULATORS?
When figuring out your home’s value, you might
be tempted to see what popular real estate sites like Zillow, Redfin, and
Trulia have to say. When you use an online calculator to determine your home’s
value on these sites, it is just an
estimate. It’s not an actual appraisal or the “true market value.” These
sites all have their own algorithms for coming up with their estimates. For
example, Zillow comes up with their “Zestimates” by calculating “public and
user-submitted data, taking into account special features, location, and market
These online estimates can be a great starting
point for opening up the conversation with your real estate agent about your
home’s worth. But even Zillow recommends that you use a real estate agent for
coming up with the actual market value of your home. The site says that once
you get your “Zestimate,” you should still get “a comparative market analysis
from a real estate agent.”
Having an agent involved in this process is
essential because they understand the market better than a computer ever could.
They’re showing property in your city every single day, and they know the
particular preferences of buyers and sellers in the area. Young professionals,
large families, empty nesters, and other groups are all looking for different
things in a home. A local agent has most likely worked with all of them, so
they understand what every segment in your market is specifically looking for.
AGENT FINDS YOUR HOME’S TRUE MARKET VALUE
So, how does an actual real estate agent
determine true market value? They’ll start by doing a comparative market
analysis (CMA). This means they’ll compare your home’s features to similar
properties in your area. For the CMA, the agent looks at the below factors to
influence their assessment of your home’s worth:6
Neighborhood sales - Your agent will look at
similar, recently sold homes in your neighborhood to see what they sold for and
what they have in common with your house.
The exterior - What does your home look like
from the outside? Your agent will factor in curb appeal, the style of the
house, the front and backyard, and anything else that impacts how the house
looks to everyone walking and driving by.
The interior - This is everything inside the
walls of the house. Square footage, number of bedrooms and bathrooms,
appliances, and more all influence the overall market value.
Age of the home - Whether you have a newer or
older home affects the number your agent comes up with as part of their
Style of the home - The style of your home is
important because buyers in different markets have different tastes. If buyers
prefer ranch-style homes and you have one, then your home may sell for a
premium (aka more money!).
Market trends - Because a local agent has so
much experience in your market, they have their finger on the pulse of your
area’s trends and know what buyers are willing to pay for a property like
Location, location, location - This one’s
probably the most obvious. Your agent will think about how popular the area is,
how safe it is, and what schools are like.
A computer algorithm simply can’t take all of
these factors into account when calculating the value of your home. The reality
is, nothing beats the accuracy of a real estate agent or professional appraiser
when it comes to determining a home’s true market value.
AGENT IS THERE EVERY STEP OF THE WAY
Determining a home’s true market value is a
real estate agent’s forte. If you’re a seller, your agent will help you find
your home’s market value so you can list it at the right price.
For buyers, your agent will help you determine
the value so you can come up with a fair offer. Your agent can also set up a
personalized home search on the Multiple Listing Service (MLS) for you so
you’ll receive emails of listings that meet your criteria. This will help you
see what’s out there in your city and how properties are being priced.
Complimentary Report With Your Home’s True Market Value
Curious about your home’s true market value?
Call us to request a free, no-obligation Comparative Market Analysis to find
out exactly how much your home is worth!