People sell their houses for different reasons. Regardless, selling your house is a big decision that requires careful market analysis to avoid future regrets. Having spent a considerable amount of money, and the fact that property appreciates, you want to make sure your investment brings in desirable returns. That’s why we can unanimously agree that it is essential to get the true value of your house before listing it for sale in the market so that you can make the most buck after closing the deal. But how can you estimate the fair market price for your property? This article will give you the critical tips.
The Importance of Knowing Your Home Value
Understanding the market price for your property indicates the amount you can expect as returns if you closed on a deal today. Besides, having the price knowledge holds a lot of benefits during both the selling process and in the long term. Here’s why real estate value is essential.
According to real estate experts, having an in-depth knowledge of your property’s value enables you to calculate the amount you can afford, make informed comparisons on a listing price, and decide how much you’ll sell your house.
Knowing your home’s worth empowers you during the transaction process, especially when closing costs come in play. They include insurance policies, property tax, title search, real-estate commission, among others. The market value of a home determines the fees charged on the closing costs.
Ways to Determine the Fair Market Value of Your Real Estate
Hire a Licensed Home Appraiser
A home appraiser helps you determine the value by conducting an initial walk-through process in your residence. They then calculate the true worth of your home through a:
- Sales comparison approach
- Cost comparison approach
Your property’s worth largely depends on several factors. They include size, plan, age, condition etc. A walk-through is the first step towards home valuation. The appraiser comes to your home and examines both the exterior and the interior. S/he assesses the state of the foundation, the building material, flooring, fixtures, and whether it is an upper fixer or a ready-to-move-in home.
After walking through the property, an appraiser employs either the sales comparison or the cost comparison technique to determine the cost of your property.
Sales Comparison – This is the most used approach for determining a property’s market worth. An appraiser analyzes similar properties (also known as comparables/comps) that have been recently sold in an area. Because real estate is uniquely developed and furnished, the appraiser makes a price adjustment on the subject property (real estate under appraisal) by factoring the differences between the comparable home and the subject property.
Cost Comparison – In this approach, an appraiser determines the value of the home based on the amount it would take to construct the house again. Therefore, s/he calculates the budget for the materials, labor, and other miscellaneous to get the cost.
Use Online Price Evaluators
A survey by the National Association of Realtors indicated that 56% of home buyers, aged 36 years and below, found their homes through the internet. On the other hand, 22% of home sellers estimated their home’s worth using an online valuation tool. That indicates the level at which people rely on the internet in the real estate market.
What online tools do is that they offer a rough estimate that’s more or less the true market value. On the other hand, the results obtained by an online tool may not be the same answer you receive from an appraiser. To understand that better: If you sold the same house multiple times using different online valuation tools, it would close at different prices.
Since most online evaluation tools use publicly available data from Multiple Listing Services (MLS) to run the price estimates. Usually, variations in prices come due to differences in the available data, the location, and the type of residential property. Some examples of automated valuation tools include:
- Zillow – Zillow allows clients to update information about their home. It has a “Price This Home” feature that gives them an estimated price of the house by using comps.
- Redfin – This delivers information about comparables and any data records available about the home. Users can then email a review if they deem the information as inaccurate.
- Realtor.com – This online home valuation tool allows you to view different properties within the same price range. With its “Other Homes in This Area” tool, you can not only get an estimated valuation for your property but also view other similar homes.
- Eppraisals – eppraisals sources data from publicly available records and lists all similar properties that have sold in a particular area. Users can then compare their homes to them [similar properties] and get an estimate.
- Chase – This automated valuation tool allows you to adjust the information about the home, the number of similar real estates sold recently, and other community trends. You can also see the estimates for any improvements.
Hire a Professional Realtor
Realtors or certified real-estate agents determine a home’s value by conducting a Comparative Market Analysis (CMA). That involves assessing the location, the conditions of the house, as well as the trending market conditions within a particular municipality. Therefore, agents consider the age of the property, upgrades, size, layout, no. of bedrooms, among others. They then pick out similar homes within the area that sold recently. Using this data, they can give an estimated market price for your residential property.
Since an appraiser represents the interests of a lender, s/he concentrates on the of-late sales to get the value of a home. Rather than that, realtors do more than that. They look at the trending listing prices, the number of available MLS options, and other factors that may affect the time it would take for the home to sell.
Knowing the value of your home enables you to fairly price the property. Furthermore, because it’s an estimation, you may get different valuation amounts from an online tool, realtor or appraiser. Hence, it is critical to be open-minded to such variations and sell your home at a price that ranges within the estimated amount.