Maybe you are considering selling your home, looking to see how much equity you have, or just want to know your home's value. It's good to know your home value in today's market and to keep tabs on it every once in a while. Who knows, you might be surprised.
But what is the most reliable way to arrive at this value? After all, it's your most valued asset. One thing is for sure, in today's tech savvy, instant estimates, social state of mind, quick answers from popular websites and computerized methods can steer you way off course. This is the wrong way to go in establishing the market value for your most valued asset.
Before we seriously dive into home values and how they are determined, have a quick look at this fun, albeit inaccurate video I put together below. It is from the point of view of both homebuyers, appraisers and your local assessor.
Appraiser, HomeBuyer and Assessor Evaluations
Having sold homes in both Illinois, South Carolina and Florida markets I can tell you some facts of what I learned in my real estate career before getting into SEO. The answer to getting a true home value is worth is really two-fold. Because real estate is local and each local market is unique. Local as in a mile radius or smaller in some markets depending on the home.
A local experienced Realtor will be about 95-99.99% accurate in providing you estimated market value.
Get more than one Realtor to give you a Comparative Market Analysis and you will get a better picture overall! That local Realtor is a valuable resource when it comes to recent home sales. Furthermore, Realtors are usually very active in their local community. They truly have a pulse on the local market and you can get an accurate estimated market value for your home very quick and at no cost as well.
The Wrong Way To Estimate Your Home's Value
Here is a typical scenario for home sellers. "Honey look, they just listed their house for $300,000 can you believe that?What? Well if their house is listed for $300K and ours is bigger, our home must be worth $450K." This is how many people I see place the value of their home in the market place. Over and over again. But when it comes down to it at closing time in a real estate transaction, it is the buyer that determines the value, in any marketplace. At least this is what I have known from my experience in real estate.
Buyer Determines Home Value
I know that when I had a home to sell for a seller client and if it was not selling or getting offers; the problem was always the price. One agent I worked with Leo Silverman said usually the first offer you get is usually the best and you should take it and negotiate on other things to close the sale. I had to disagree with him on that one but I soon learned that at that time when I was active in real estate he was right.
A lot of homeowners, real estate investors and even builders get home values wrong. In many cases when I sold real estate, I had several appraisals come in. In each case I proved the buyer determined the price of the home. They most often do in any market. A will and able buyer is crucial. Also, many market in some areas have little to no inventory. So this you need to account into a proper evaluation as well.
3 Main Components of a Accurate House Value
#1 How is Real Estate Valued?
This is actually simple because you already do it. I hate to use this analogy for your most valued asset but let's look at the iPhone. Picture buying an iPhone on eBay before you would buy that smartphone wouldn't you try to look and see what other iPhone's were selling for? Identical to the one you want to buy right? If you go to a grocery store and you want to buy bread, you can try to compare which one is the best deal. You are looking at different breads to try to compare which one to buy. This process of looking at comparable sales is how you compare most items you buy. Figure out if it's a good deal or if it's overpriced. Real Estate is the same way. When looking at comparable properties you should look at what they sold for in comparison to the property that you want to know the value of.
#2 Where is the Information Coming From To Arrive at a Value?
There's two places where home values actually come from. The first one is county records. County records is what can cause a lot of confusion. In every county in America what you have is you have different departments. Two of the departments that we deal with for county records is going to be the tax assessor's office as well as the recorders office or the Register of Deeds.
The Register of Deeds is the group that records deeds and other such documents. These records can tell you information such as what the property was, what liens are on the property, who the owner is and how long they've been the owner when that deed was recorded. Some areas the county records and the recorders office has sales information but not all of them. Now this is where it gets a little iffy. Some states are non disclosure states like Texas whereby they are not required to disclose the sales price on the deed that gets recorded. In other areas it is disclosed so they will show it.
The second is the tax assessor's office. Now the tax assessor, their job is to figure out the relative value of each property in their County so they can tax it. They can tax it as a percentage of the value as long as they know what type of property it is. Say if it's a duplex which could be commercial versus a single-family home. So Tax Assessors are putting a tax appraisal on every single property. So some look at that and say, oh the tax appraisal that must be a good source. No way!
The first thing is most homeowners are not willing to share every bit of news with Tax Assessors. If they add 900 square feet in the form of an extra bedroom and bathroom, they may not tell the tax assessor. Why? So they can keep their tax assessment lower and pay less in taxes. In certain states there are homesteads and other kinds of policies which as you own the property you can elect that the tax appraisal can only go by up by a certain amount each year as a maximum. What happens is over the course of many years that tax appraisal can lag way behind the actual current real value. So tax appraisals can be way off. Also the tax assessor is supposed to put the number of bedrooms, bathrooms, square footage as part of their assessment. But they get that wrong many times because they only get access inside a property less than half the time.
#3 Who is making the comparison?
Who is comparing? In this day and age there's a lot of people that love computers. Computers can do a lot of great things. They can calculate very efficiently, very consistently when it comes to massive number crunching. Take, for instance an online mortgage calculator, affordability calculator or refinance calculators. These are great tools you can use with amortization tables so accurate down to the penny. But computers don't see the bigger picture. Computers don't know when they have been programmed with a bug. That bug being wrong assessor data, wrong recorded sales data and so on.
There are too many variables you need to verify if you want to properly assess home value correctly. They don't know how to look outside themselves and say hey there's a bug. They can't tell if the numbers look wrong after they've calculated something. So what happens is we have a lot of people who want computers to make decisions for them? When technically the best role of a computer is to help you be more informed so you can make great decisions. Humans are not computers. We have this wonderful ability to do all sorts of things that at this point especially in the real-estate investing world, technology is not available yet to to duplicate the human brain.
The Local MLS - The Crucial Key Value Component
The MLS is the Multiple Listing Service. MLS data is controlled by the Realtors. More specifically each MLS is independently owned and there can be more than one in the same geographic area. Remember my statement from earlier about Real Estate being local? Each MLS is actually localized and independently owned as it should be. Because Real Estate is very much a local market. It is the information put in there by real estate agents. The great thing about the MLS is that real estate agents have this natural checks and balances system. So that insures that the listing information of each property is accurate.
Your Home's Value is closely related to Location, Location, Location
Locations play a big role in real estate.You can go from absolute the nicest part of town to complete foreclosure run down neighborhoods within two miles. But the computer doesn't know that. Zillow, Trulia and the like, they're all getting their data from the recorders of the county records and they don't really have a good way to be able to match up neighborhoods properly. These home value estimator tools that blow out data like a toupee on a windy day, are not reliable. For example, what if you get a bunch of new subdivisions interspersed with some really old subdivisions? Well you don't want to compare those brand-new homes with those super old homes. It's just not even a comparison.
Contact a Local Realtor
That's how you determine property values. You already have the skill you just need to get access to the right information and make sure that you're doing the choosing of the comps not computers. If you do get lucky and then Zillow actually calculates correctly in your area from time to time, great but don't rely on it! You need to know on every deal as a home seller exactly what the value is and not to be off. Thanks for reading how much is my house worth article and hope this helps you with properly assessing and residential property better. Whether you have student loans in the family, or just want to know your home equity, contact a local Realtor for recent home sales or comment below. Realtors can also tell if a home closed with any type of fha loans.