The Top 3 ways to Determine a Homes Value

The Top 3 ways to Determine a Homes Value

In most states there are values determined by the tax assessor’s office. It might be called your tax value, assessed value or something similar. That number might not be 100% of the property value. Usually there is some type of formula that each city or state uses.

Unfortunately using the taxable basis fails to take into account a number of things, like:

1. What are homes actually selling for in your neighborhood?
2. What is the condition of your home?
3. What upgrades have been made to your home?

As you might be able to guess, all of these factors can have a huge impact on the value of your home and would be in no way reflected on the taxable basis. The result, your home will either be over- or under-priced.

Here are the top 3 ways to determine a value of a home:

1. Appraisal

An appraisal is probably the most accurate way of determining a home’s value. While it seems to be the most costly in the short term, what it can save you in the long run by having your home accurately priced offsets the upfront cost. If you are going to sell your home on a “For Sale by Owner” basis, I cannot encourage you enough to have an appraisal done. When you order the appraisal, make sure you ask for a market value. This will give you the closest possible pricing guide for your home.

1.     Real Estate Agents

Making use of a real estate agent can be an excellent way to determine the value of your home. Real estate agents, like appraisers, actually look at recent sold comparables and look at your home to determine how its condition affects its value, and then suggest a price before listing your home. Unlike appraisers, they also take into consideration the current competition. They will perform an analysis of value, for no charge in most cases.

When you meet with an agent, ask to see “comparables”. They should show you recent sales comparables as well as what is currently on the market. Ask the agent WHY they are suggesting a particular price. Also ask them what you should expect to receive for a sales price on your home. A good real estate agent should easily be able to justify the asking price with accurate comparables and condition analysis of your home.

2.     Your Neighbors

Another method I have seen employed quite often is to price a home’s value based on what your nearby neighbors are trying to sell their homes for, and then almost always adding some. Why would you add some? Of course, your home is better, right? It might be or it might not be. But most sellers think their home is nicer or more updated than their neighbors. Be careful with this, as it can be a dangerous way to price your home.

This method makes several assumptions that will likely lead to pricing trouble:

1. You are assuming that your neighbors’ homes are priced accurately.
2. You are assuming that your home is genuinely comparable to your neighbors.

Even if you happen to live in a neighborhood of identically sized ranch houses with identical lots, there can still be pricing differences based on the condition and improvements in the home. If you have a finished basement or a newly remodeled kitchen, you need to be able to accurately set a value for those improvements.

Want to learn more about selling your home as a rent to own?  See Wendy Patton’s book, Rent to Sell, Your Hands on Guide to Sell Your Home When Buyers Are Scarce.

If you have any comments or questions please feel free to put them in the comment section!