Home Valuation: How Much Is Your Home Worth?
There are some reasons why you may want to know how much your home is worth. If you plan to refinance your mortgage, you will certainly need to know how much your house is worth. You definitely need to know the value of your home if you are planning to sell. Maybe you don't plan to do anything, but are just curious. In this article, we will tell you how to go about finding out how much your house is worth.
We will discuss the different ways of home valuation beginning with the least accurate (local tax assessments) and concluding with the most accurate (real estate appraisal). Each of the methods, despite its strengths and weaknesses, uses similar home sale data compiled by the Multiple Listing Service (MLS).
Government Tax Assessments
Tax assessor valuations are typically based on sales data from a previous time period. The exact method will vary by assessor. An assessment for this year's taxes, for example, might be based on comparative sales data for the previous two years. This valuation method has a major shortcoming in that it does not reflect the current market.
The most important thing to remember with tax assessments is that their purpose is not to tell you how much you can sell your home for. Rather, they are used to assess a tax on your home.
Internet Real Estate Valuation
There are several websites that specialize in real estate valuation. Perhaps the most well known of these is HouseValues ( www.housevalues.com ). When you go to the site, you will be asked to complete a questionnaire about your home - square footage, number of bathrooms, number of bedrooms, etc. Shortly thereafter, you will receive a market analysis from a realtor in your area. You may also have the realtor show up at your doorstep since sites like House Values are paid by realtors looking for leads.
HouseValues is just one example of this type of site. Since the services are free (paid for by realtors looking for leads), you may want to go ahead and get multiple estimates of your homes value. Other sites to check out are HomeGain ( www.home-gain.com ).
As useful as these types of sites are, you will always get a more accurate assessment of your home's value by having a comparative market analysis (CMA) done by a real estate professional.
Real Estate Market Analysis
Realtors are always very willing to provide a free market analysis of homes. They do this hoping to pick up a listing if you do decide to sell. These valuations are extremely useful. Realtors are very tuned in to the markets in which they work. They can usually give you a fairly accurate value for your home after doing a quick walk-through. When combined with a comparison of recent home sales in your area, you get a very accurate value for your home.
Real estate appraisals are the most accurate means of home valuation
Real estate appraisals are comparative market analyses done by independent appraisers. They use the same type of comparisons as those done by realtors, but they tend to me more complete and based in research. A realtor will use both comparable sales data and their subjective knowledge of the local market, while an appraiser will look at the location of the home, the condition of the home, and the types of improvements that have been made to the home. This data helps the appraiser use the most relevant comparisons.
Real estate appraisals tend to be more conservative than the market based approach used by realtors. This is only natural since appraisers value homes using the same methodology as that used by lenders in determining risk.
There are times, however, when a realtor may have much better insight into a home's value. When real estate markets are red hot, for example, a good realtor will be much more in tune with recent sales and just how quickly the prices are rising. This will help you maximize the return on the sale of your home. There is nothing worse than leaving money on the table.
Property is only worth what another person is willing to pay for it
This is true for any asset. Each of the house valuation methods presented has a degree of relevance to a home owner/seller. Ultimately, it is the convergence of market forces that occur when you list your home for sale that determines the true value. Take the appraisals, market analysis and tax assessments for what they are - very useful home valuation tools.