How to Determine what Your Home is Worth

How to Determine what Your Home is Worth

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what's my home worthIf you’re thinking about listing your home for sale, it’s important you have a good idea of what it is actually worth in the current market. Your real estate agent will provide you with comps and a price they recommend you list it at, however, it never hurts to have a second opinion; and if you are listing your house “for sale by owner” it’s important you know how to ascertain the market value of your home on your own. Here are some tactics you can use to come up with the right price for your home’s fair market value.

Consider the Comps

Comparables, also known as “comps,” is an aggregate of the information pertaining to homes nearby and similar to yours that have sold in the last three months. Your real estate agent will most likely use the information from these comps to create what is known as a “Comparative Market Analysis” to set the selling price for your home. While you can gather and compile comps relatively easily on your own, you can use the in depth knowledge you have on your own home to take this information one step further. For starters, you can create a chart with all the selling prices for nearby homes and cut out any outliers – or homes that sold way above or way below their market value, usually for some extraordinary reason. Using the remaining homes, you can come up with the average percentage above or below their market value that they sold for. You can also compare each individual, similar home to yours and make adjustments to your home’s value for any improvements you have made recently that increase its value, or that would make it preferable over comparable homes. Even if your improvements don’t directly translate into added value – like installing eco-friendlier heating and cooling systems, for example – they can still help your home sell quicker.

Hire an Appraiser

While hiring an appraiser can cost you a few hundred dollars, you will still want to consider doing so. The home appraisal is also usually a contingency in most offer contracts so this will have be done at some point anyhow. Your home appraiser will usually result in a much different number than that of your real estate agent. Make sure you hire an independent appraiser, though, who is familiar with the area, that way they can make important adjustments to their estimate for the unique features of your home.

Base Your Price on the Three C’s

A widely used pricing technique uses the following “three C’s” to come up with the value of a home:

  • Competition – know what other homes with comparable price ranges to your own are on the market. You can then adjust your price either more or less aggressively, depending on the competition.
  • Consumption – this refers to the average number of homes sold within a neighborhood in a given period of time, usually on a per month basis. If similar, nearby homes sell on an average of two per month, for instance, and aside from yours, there are three listed for sale – it should take you about two months to sell your home if it is priced about the same as the others.
  • Condition – compare your homes to the other ones currently on the market. Try to use the perspective of a picky buyer, and come up with the pros and cons of your home as compared to the competition.

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