Knowing the Value
When considering the sale of a home, one of the biggest determining factos on whether one can sell or not, will be based on the value of the home. This is after all, a very important factor in this equation.
Knowing the current market value of the home and most likely sales price, will help determine whether a homeowner will be able to make enough on the sale to move foward with placing home on the market for sale. Alternatively, one may also be able to determine whether they can sell the home in the first place.
You may think that finding out the value of the home or likely sales price only leads to homeowner making a profit with the sale of a home. That is not always the case, as there are several instances in which a homeowner may lose money on the sale of a home. As an example, many homeowners in the years 2008-2013 lost homes and money during the recession. Also, many homeowners may purchase a home only to end up having to relocate within a short period of time. This also, will more than likely result and a homeowner having to sell at a loss. Point is, knowing the value of the home in todays market is key in knowing whether you can and should move forward with selling your home.
Way to find out the value of your home
So to the point, there are namely 3 ways a homeowner can go about getting or determingin the current market value of their home:
- An Appraisal - this is something done by an appraiser, who is a professinal within the real estate industry whose sole purpose is to determine a home's current market value. This is a professional service, and while fees will range, as of the time of this article the average cost is about $550.
- On-line Valuation - There really is a LOT of on-line valuation sites. The problem is in knowing whether they can be trusted and are accurate? I for one question where many of these sites are pulling their informaiton from to determine the value of a home. One of the biggest, we all know their name, discloses that they are only within 10% of the final sales price 60% of the time..........thats a "D". Not good!!
- Could ask a realtor - Well not all realtors may do this service, but many included myself do. Also to consider is how much experience and knowledge the realtor has of the area where they are doing the valuation.
The above are some of the choices one has to help determine the value of the home, in todays market. The first choice will of course be one that costs the homeowner money up front, but is likely pretty accurate. The second choice, has a 60% chance of being 10% off, which in my opinion is not a great choice. Think about that, in an area that averages $300,000 homes sales price, they could be atleast $30,000 off!
The last choice, is likely one of the best choices to help you decide whether one is ready to move forward with the sale of their home. This will not cost the homeowner anything up front, it is pretty darn accurate and one can also discuss fees associated with selling and even marketing strategy.
Tips and steps to finding out your home's value
How will the realtor go about finding out the current market value of your home? Also, how can you go about finding out the current value of your home? Let me tell you exactly how you can go about finding out the value, the steps to take and the most likely price you will get in the sale.
One of the first steps will be to determine all the information about the subject property necessary for the valuation. The subject property, is of course the home whose value is being determinted. The minumum information you need to begin is as follows:
1. Square footage of home
2. Age of home, or year built
3. Lot size
4. Bedroom count - number of bedrooms
5. Bathroom count - number of bathrooms
6. Parking features
7. Does the home have a pool?
The above again, are what I feel are the minimum requirements needed to being an accurate valuation for a property. Once this information is known about the subject property, then begin a search for similar properties which will be used for the valuation. You will want to consider recent homes that have sold, homes that are currently under contract, and lastly homes currently for sale on the active market.
When deciding on which homes to use as comparable properties one must also consider their location and distance from the subject property. The ideal situation is similar homes within the same subdivision. If one can't find homes within the same subdivision, maybe go out to neighboring subdivisions. Most lenders and appraisers will try to stay within a 1 mile radius of the subject property. For propreties that are like ranches, or custom homes, a larger radius may be used. Ideally those closer are preferred but on specialty properties distance is given and allowed.
Time frames of recent sales are also very important in the consideration of comparable properties. In order to get the most accurate value, one must look at some of the most recent home sales of the similar homes. Lenders and appraisers, and for that matter most of us realtors as well, try to find recent sales which have occurred no more than 120 days back. Ideally if one can find sales within 30 to 60 days that would be the perfect situation.
When looking for similar properties, the exact homes may or may not be available for comparison. What many banks, or appraisers, or even realtors will then do is look for those that are most similar to the subject property. Ideally, one may even be able to bracket the properties in some way based on the above criteria, and make either negative or postive adjustments based on the comparison. This is really where some of the knowledge and experience really comes in handy.
For many valuations I have done over the years, I will try to bracket the property. The idea is to find similar homes with differences of no more than 20% above or below subject property. This generally will fall into the category of square footage of home, or the size of the lot. In some cases you may get a very unique home, that maybe is the only one in the subdivision that is on a very large lot, and a adjustment must be made. Depedning on how the simlar homes compare, then the adjustment will be made either by deducting value or adding value.
As an example if you choose another comparable home that has more bedrooms than the subject property, an adjustment will need to be made in value. The idea is to either make a negative dollar adjustment or positive one to the comparable properties to arrive at a value for the subject home. So the comparable property in this case would get a reduction in value for the additional value, thus making it more comparable/similar to the subject home. One thing that you will need to consider as well, is how much of an adjustment is called for in the value.
Making adjustments to the value
How much of an adjustment needs to be made to the comparable homes based on their differences? That really is the million dollar questions, and I will not really be able to give you a universal answer. All appraisers, realtors and other professionals that conduct home valuations have different values that are used. The values will also differ, depending on the area one is working in as well (Laveen vs. Scottsdale). As an example for value, how much value can be given for a home with:
1. An additional bedrooms?
2. An additional parking spot in the garage?
3. A remodeled kitchen?
4. A larger lot?
5. Granite counters in kitchen vs. laminate
6. Will additional value be given for solar? Is it leased or owned? Does it make a difference?
As one can see, there is a LOT to know about getting to the true market value of a home. Unfortunately there is not a simple, press of the button, super-fast way to get the true value. To get an accurate value for your Laveen Az home, it will require some work!
There is a lot of work that goes into finding out the value of a home. Starting with finding the best comparable homes to use for the valuation, as well a making adjustments in value and knowing how much to adjust that value. As an example a home having a pool could be worth an additional $5000 to $25,000 depending on type of pool, condition of pool and the location of property. It could also not carry any value, again depending on where the home is located. The point I want to drive home, is that values added or taken vary.
In the end one now has a 4th option for determining the value of their home, they can use the above information and determine their own homes value. Find similar homes as explained, and make adjustments as necessary to arrive at the present value of your home. You will need to study the market, and values of other homes in area, to help determine the best adjustment amount to use if bracketing.
If considering selling though, my strongest recommendation though would be to consult a realtor who specializes in your area. My name is David Alan Baker, and I am a Laveen and South Phoenix realtor, I've specialized in the area since 2004 and would like the opportunity to earn your business.