How much is your home worth? How much can you sell it for?
“What’s my house value?” is one of the most common questions that property owners have today. So, how do you know? What factors are involved in valuing a home?
Determining the value of a house can be one of the most confusing, stressful and frustrating things an owner can have to deal with. Especially when it comes time to sell a house. Fortunately, it doesn’t have to be.
We’ve got the answers to your most pressing questions, right here…
Why Your Property Value Matters
When thinking about refinancing a home can be an important time to know your property value. You want to have an idea of how much it is worth to know how much a lender is likely to loan you, and on what terms.
It’s also good to keep a rough track on your home value on a regular basis. It is valuable for knowing how much equity and wealth you’ve gained or lost, and have at risk. It can feel great when the housing market has been going up, but you can lose it all overnight when it changes. Unless you sell and capture and cash out that equity. Wait too long and you can be in the hole, and owe more on your property than it is worth.
After when you bought it, knowing your house value is probably most pivotal when it comes time to sell. You want to get a fair deal. You know if you ask for too much it won’t sell and you’ll just be wasting your time. Though you don’t want to give away too much either.
How Are Properties Valued
Home valuation is still very much an art and a science. There is clear math to it, but also opinion, and varying perspectives.
Put in the simplest way, your house is worth the amount that someone is willing to pay for it at the moment.
Though exactly, what that number comes out to be, and how much you end up putting in your pocket at the bottom line also depends on how you are selling.
Property Values By Method Of Selling
How a property is being sold can significantly impact how it is priced. These are some of the most common of them.
Property auctions often start out from the debt owed on the property. This can be as little as a few dollars in the case of homes being auctioned off for delinquent property taxes. Whoever is willing to bid the most gets the property.
When a home buyer needs a mortgage to buy your home then their lender really determines the value of the home. They will order an appraiser from a licensed appraiser. Often they will also use a second appraisal or AVM (a type of mini online appraisal). Though it is the lender who ultimately decides the value they like and how much they will loan. Of course, it is normally in their best interest to minimize the value to reduce their risk. This is what causes endless frustrations with failed real estate closing.
Selling Your Home For Cash
True cash home buyers typically won’t demand an appraisal. They know the market. They decide the amount of risk they are willing to take on buying your property. They are going to typically offer more than your home would fetch at an auction. Though sometimes less than a financed buyer. But, with no Realtor commissions and a faster closing, this option can often still net you more cash.
Home Appraisal Methods
There are several traditional methods of valuing real estate.
The Income Approach
This is typically used for rental properties. The property is valued based on how much income it can produce. That is based on competing market rental rates.
Unfortunately, COVID and its resulting eviction bans may have really thrown a wrench in this calculation and the ability to generate consistent and reliable income from rental properties.
Replacement Cost Approach
This is all about determining how much it would cost to rebuild the home and replicate it. Mortgage lenders like to have your home insured for this much to cover them in case of a disaster.
The sales comparison approach is the most common and accepted way to value homes.
This determines the value of your home based upon recent neighboring sales of similar properties.
So, if an identical home on each side of yours sold for $100,000 yesterday, yours would be considered to be worth $100,000.
It is important to remember that most weight is given to the most recent comparable sales, and the most similar comparable homes. Only closed home sales count, not what others have listed for, or pending home sales.
Factors That Make Up Your House Value
When an appraiser compares homes, there are a variety of factors and features that are evaluated.
The most important include:
How To Find Out What Is The Value Of My House?
There are several ways that you as a homeowner can get a better handle on your house value to be sure you are getting a fair offer.
Whatever you do, don’t use Zillow. Evaluations of their tool have found it deeply flawed almost half of the time, and it is so broken that it has led to many lawsuits.
You probably don’t want to splurge on an official appraisal. An appraisal can only be used by the person ordering it. So, if you spend several hundred dollars on one, the buyer or lender is going to order their own anyway, and have to factor that cost into their offer.
You can try to track your home value using actual closed and recorded sales of identical homes. Though that can be a lot of work too.
We’ve tried to make it super fast and easy for you with our free house value tool. Check it out, and you can even get a free no-obligation offer for your home too.