Are you considering selling your home, looking to see how much equity you have, or just wanting to know your home's value? It's good to know your house value in today's market and to keep tabs on it every once in a while. After all, it's your most valued asset. Who knows, you might be surprised. But what is the most reliable way to arrive at a correct value? 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, and are the wrong way to go in establishing proper house worth and house value for your largest asset.
Having sold real estate in both Illinois, South Carolina, and Florida markets, I know the inside scoop for getting any house value in any housing market. Because house value is local, as in a mile radius or smaller in some markets, and each local housing market is unique, you need a local, experienced Realtor®, who will be able to provide you an estimated house value with about 95-99.99% accuracy. Get more than one Realtor® to give you a Comparative Market Analysis and you will get an even better picture!
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 house value very quickly and at no cost.
House Value Estimates: The Wrong Way to Estimate How Much is my House Worth
Here is a typical scenario for home sellers. "Honey, look, our neighbors just listed their house for $300,000. Can you believe that?" "Well, if their house listed for $300,000 and ours is bigger, our house must be worth $450,000." Over and over again, this is how many people I see place the value of their house in the marketplace. But in a real estate transaction, as in any marketplace, it is the buyer that determines the actual house value.
Has the market changed? I know that when I had a house to sell for a client, and if it was not selling or getting offers, the problem was always the price. One agent I worked with, Leo Silverman, said that the first offer you get is usually the best and you should take it, and then negotiate on other things to close the sale. I was uncertain at first, but I soon learned that he was right.
When it comes to house value, a lot of homeowners, real estate investors, and sellers get it wrong. I will share with you where the confusion comes from and how to get clarity. Keep in mind there are many factors involved when trying to find true house value.
5 Factors That Determine House Value
House Square Footage
House Age and Condition
House Amenities and Upgrades
Local House Market Conditions
You have to consider the location, condition, age, neighborhood, current inventory of homes for sale, current buyer demand, and many more factors. The complexity of this task is why I stress that if you are at all curious about how much a certain house is valued, to get with a local Realtor®.
3 Main House Value Questions for any Accurate House Value Analysis
#1 How is real estate valued?
I hate to use this analogy for house values, but let's look at the iPhone. Picture buying an iPhone on eBay. Before buying it, wouldn't you look and see what other, identical iPhone's were selling for? If you go to a grocery store to buy bread, you compare which one is the best deal. This process of looking at comparable sales is how you figure out if it's a good deal, or if it's overpriced.
Your house value works in the same way. When you want to know the value of a property, look at comparable property and see what it sold for. Notice I mentioned the word "sold," not "listed." That's how you figure out the house value. The closer a home is to the selling price the faster it will sell. But if it's so easy, how come so many people get it wrong? There are two main reasons: the first is who is making the comparison, and the second is where they're getting their information.
#2 Who is making the comparison?
Computers can can calculate efficiently and consistently when it comes to massive number crunching. Take for instance an online mortgage calculator, affordability calculator, or refinance calculators. These are great tools to use with amortization tables that will be accurate down to the penny. But computers don't see the bigger picture, and they need people to find house value data and input it into the system.
#3 Where is the information coming from?
The primary source for house value information is county records. But county records can cause a lot of confusion, because every county in America has different departments. Two of the departments that we deal with for county records are the Tax Assessor's Office as well as the Recorder’s Office or the Register of Deeds.
- House Square Footage
- House Liens
- House Owner
- House Improvements Data
- House Permits ( Current and Past )
- House and Property Parcel ID
- House Taxes ( amount paid and or due )
- House Ownership Type
- House Seller Name
- House Buyer Name
- House Sale Price
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 is, what liens are on the property, who the owner is and how long they've been the owner when that deed was recorded. In some areas the county records and the Recorder’s Office also have sales information, but not in other areas. This is where it gets a little iffy. Some states are non-disclosure states, like Texas, where 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.
So states like Tennessee, which are a disclosure state, always have a line on the deed where you're supposed to put in the sales price. There are other states that are strict non-disclosure states, like New Mexico, where there is no requirement for a sales price on the deed. From my searches into local house value, I found that South Carolina, South Dakota, North Dakota, North Carolina, Rhode Island, and West Virginia do provide this data. So as you can see, certain states reveal sales prices at the Recorder’s Office level and some don't. This can be a huge hornet's nest for a house's value. So how can you get reliable information on house value? Keep reading for the answer.
The second source of information 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 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 house. Since Tax Assessors are putting a tax appraisal on every single property, some look at that and say, "Oh, the tax appraisal must be a good source."
No way! Let me tell you what happens to tax appraisals, since 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. And in certain states there are homesteads and other kinds of policies, where you can elect that the tax appraisal can only go up by a certain amount each year as a maximum. Over the course of many years the tax appraisal can lag behind the current real value.
- Drive By House Appraisal
- Is Appraisal for Refinance of Purchase?
- Who ordered the Appraisal?
- Foreclosures Affecting House Appraisal
House Appraisal Appeal
Not only can tax appraisals be way off, but also the number of bedrooms, bathrooms, and square footage can be wrong because the Tax Assessor can only get access inside a property less than half the time. Like I mentioned before, most property owners try to hide how many bedrooms and bathrooms they have because it'll reduce their overall tax appraisal.
If the County Recorder's Office — the Register of Deeds and the Tax Assessor — are off in house value or appraisal because of inaccurate records, where can you get the best information for how to get an accurate and fair market value? Not Zillow! Zillow works by using their algorithms and their property valuation tool to give you an estimate which can be very misleading. Your home, as well as your home equity, is your most valued asset. These 2 minute online estimates are not accurate, regardless of which website you use.
- Recent Sales Price for House Value
- Square Footage for House Value Appraisal
- How much are the Liens on House
- Owner of House for House Value Tax Levy
- House Improvements House Value Permits
Computers don't know when they have been programmed with a bug, such as 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 house value. Computers don't know how to look outside themselves, and they can't tell if the numbers look wrong after they've calculated something. So what happens when we have a lot of people who want computers to make decisions for them? Well, technically the best role of a computer is to help you be more informed so you can make great decisions. We have this wonderful ability to do all sorts of things that technology is not yet able to duplicate, especially in the real-estate investing world.
What happens when Zillow, or another site, instantly estimates your home's value? While they've made a lot of headway with their technology, and they're doing better all the time, websites have massive weaknesses. One of those weaknesses is drawing all their information from the county records to determine a house's estimate. Tax Assessors' information, as mentioned before, could all be wrong. Not only are they using that information, but when trying to figure out which properties are comparable, they're drawing a circle around the property in something like a two mile radius. But you and I both know that there are pockets in every part of the US where if you go two miles apart they're in completely different worlds. A 2,000 square-foot home in north San Francisco compared to the same type of home in the south side might be 30% cheaper.
The Local MLS - The Crucial How Much House Value, House Worth Component
The MLS is the Multiple Listing Service, which is controlled by the Realtors® who put the information into it. 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 localized and independently owned, as it should be, because real estate is very much a local market.
The great thing about the MLS is that real estate agents have a natural checks and balances system, which insures that the information about each property is accurate. Here's how it works. Let's say you're a listing agent, and you list a property for sale and input it in the local MLS. If you put in the wrong bedrooms, wrong bathroom count, wrong square footage, wrong anything, someone will find out. Then, you would either have to make the changes or get a fine from the MLS. This accountability system provides natural checks and balances within the MLS, so the data is both good and accurate.
The MLS is why I highly advise you to contact a local Realtor® when trying to establish the true value of your home. And the MLS has other wonderful features. It will tell you not only the exact sales price that occurred, but also if there are seller concessions. In many cases, you can see if the seller paid for closing costs, because that also plays a role in the overall sales price.
Here are some factors you and your agent should consider for getting an accurate house value. Be sure to compare similar homes that closed no longer than 6 months ago.
8 Factors to Compare for Any House Value Using MLS Comps
- House Square Footage
- House Closing Date
- # of Bedrooms in House
- # of Bathrooms in House
- How much older is Comparable House
- House Updates
- House Exterior
- Lot Size
The MLS is where the data needs to come from to make these accurate comparisons, but it does have a couple of drawbacks. The MLS doesn't tell you what liens are on the property, and it doesn't tell you who the owner is. That's where the County Recorder's Office can help you. By combining county records and the MLS data you can get in the right direction to truly understand your property value. But even with the best information, you can still screw up in determining property values.
House Value is Also Determined by Location, Location, Location
Locations play a big role in house value. You can go from the absolute nicest part of town to completely run-down neighborhoods, all within two miles. But the computer doesn't know that. Zillow, Trulia, and the like, are all getting their data from county records, and they don't really have a good way to match up neighborhoods properly. These house 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 not even a comparison.
What if there is a brand-new home being built in an older neighborhood? The computer can't be the comparing mechanism, because it can't choose which houses are comparable. Truly comparable homes are what you're looking for. That's what the MLS provides: true comparables. So again, let's go back to our iPhone example. If you're trying to figure out if an iPhone is a good deal or not, you need to look at iPhones that are identical to the one you want to buy to compare what those sales were.
Getting that apples-to-apples comparison in real estate means you need to find accurate comparable sales, and computers can't do this. Zillow and Trulia can be an absolute disaster on values when it comes to their home value estimator. The only time an estimator is useful is for things like a mortgage calculator, or when you are calculating your credit card payment. A good affordability calculator can be highly accurate. But no calculator will give you an accurate home value.
This can actually work for you or against you, depending on if you're selling or buying, and how Zillow spews out their data. But usually it is a bad idea to use sites like this, because their systems are using the same bad data and the same bad circle-radius comparables. So they're all giving you numbers that are all bad, and that's the best way to describe it. What you want to do differently in getting property values is accessing the MLS with your local Realtor®, because selling homes is their life.Why Websites Cannot Give an Accurate House Value
- Websites use Random Generated House Value comparables
- Websites don't know about House Values in Certain Neighborhoods
- House Value Require an Independent Appraisal
- Banks do not use Website to determine House Value ( Why should you? )
- Websites Can't Tell the Character of a House Location and Improvements
House Value Comparable Data not Manually Checked
Picture that you were going to buy a property and look at the comparables. How do other properties compare with the property you want know the value of? If this home that sold for $300,000 was one of the comparables, then why was that one $300,000 and the other one $275,000? What made it different? Did the first one have more square footage or an extra bedroom?
You don't have to be too scientific about it, because in the end the buyer is the person making the offer and determining the actual house value. That's why you don't need to be scientific in every way when you evaluate these comparables. Instead, you want to create an overview, and then start to determine a range of what your house is going to sell for in the real world. That's how you determine property values.
You already have the skills, you just need to get access to the right information and make sure you're the one choosing the comparables, instead of letting a computer choose. You need to know, on every deal as a home seller, exactly what the value is. Whether you have student loans in the family, or just want to know your home equity, contact a local experienced Realtor® for recent home sales (or comment below). Realtors® can also tell if a certain house closed with any type of FHA loans.
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Final Note on Mortgages, Financing and Home Equity Value
Whether you want to know how much your house is worth in today's market for home equity, your home equity line of credit (HELOC), or refinancing, I want to recommend some local loan officers. Get in touch with me here.
A local professional loan officer specializes in first time home buyer loans, FHA loans, VA loans, loan options, amortization calculations, and debt consolidation. They can run your credit score and provide you with the lowest mortgage rates! Because your credit score is closely related to your home equity line, they can check on refinance rates and equity lines of credit. The best part is you can see an amortization calculator with loan options to suit your needs. Using your home equity to pay off student loans and credit cards is the way to go, as your home value can offset any debt consolidation with a balance transfer.