What’s your house worth?
It’s a popular question, judging by the number of banner ads, e-mails and sponsored links that seem to appear everywhere on the Internet. And it appears to be an easy question to answer as well, since it seems that all of these advertisers are willing to simply give the answer for free.
For consumers looking to buy, sell or refinance a house or take out a home equity loan, getting the right answer to the question is of critical importance. But how can the average consumer sort out what’s real from what’s hype? And how good is the free information that can be found online?
Unfortunately, there are no simple answers to these questions. But one certainty is that the “estimated house value” that is available for free online is usually not terribly accurate.
- Often, the estimate is a zip code average — meaning that the sales prices of all the properties in a given zip code have been added together and averaged on a square footage basis. The estimating software will simply multiply the square footage of your home by this average, regardless of whether you own a single family home on a two acre lot or live in a condo.
- Many times the “estimated house value” isn’t even that sophisticated. It’s simply a list of sales prices of properties somewhere in the vicinity of your home. If one of the homes has been sold recently, and is just like yours, this is useful. But this often isn’t the case.
- Sadly, many of the websites offering house values don’t even deliver this much information. They instead promise to have a real estate agent deliver a home value after requiring the homeowner to fill out lengthy forms.
So how can a consumer find out what his or her home — or a home he or she is interested in buying — is actually worth? The first step is to obtain a Custom Market Analysis (CMA) of the property, which can be obtained through a local real estate agent or ordered instantly online from companies like RealtyTrac. The CMA report will give an estimate of the property’s value based on a number of factors traditionally used by real estate agents to determine the optimal purchase or sales price of a home.
But there’s more to determining the value of a home than just ordering a home value report. It’s important to consider other factors which may increase or decrease the actual value of the property. Here are five tips that homeowners and home seekers should keep in mind when they get the home value report in their hands:
Compare apples to apples
Not all home value reports are equal. Some may use “comps,” which are recent sales of nearby properties, that may or may not be appropriate for estimating the value of the property in question. For a true estimate of a home’s worth, it should be compared to homes of the same size, in the same neighborhood, with the same features. The number of comps the featured property is compared to is not as important as the type of comps it is being compared to; quality is more important than quantity.
Factor in location features
It is important to take into account the neighborhood in which the property resides. A good CMA report gives important neighborhood statistics, such as local crime information and school data. A quiet property with a nice view is sure to be valued higher than a home drowning in the sounds of a busy street. If a CMA estimate did not take this into account, the final number should be adjusted accordingly.
Comb current listings
Skimming the current asking prices of homes on the market and comparing them to the CMA estimate is a vital step in the home value assessment process. If the evaluated price seems to be in sync with what’s currently out there, chances are it’s an accurate assessment. If you order a CMA, ask to see a sample first. Make sure the CMA includes current property listings which will help you evaluate current market conditions.
Evaluate the condition
Regardless of what the estimated value of a property might be, consumers need to factor in the property’s condition. Any recent or extensive upgrades or any necessary repairs should be calculated into the estimated value the CMA report presents.
Ask an agent’s opinion
Even after taking all the rights steps to ensure that the final value of a property is accurate, take the extra step of asking a professional. Real estate agents have the benefit of exposure to the current market and can give their judgment on the accuracy of the home’s fair market value.
Like any good recipe, the key to accurately determining a home’s value is to know all the ingredients that should be included, and then knowing what to do with these ingredients. While the house values found on free websites aren’t always accurate, consumers today can still use Internet tools to confidently determine the real value of their homes.
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