It’s easy to know how much money you have in your savings account or the real-time value of your stock investments. But, determining what your home is actually worth is trickier.
As a seller, knowing what’s your home actually worth, helps you price it correctly when you put it up for sale. If you price it too high, it may sit on the market. But price it too low and you may be losing out on a good chunk of money (nobody wants that!). For buyers, it’s important to know a home’s worth before you make an offer. You want your offer to be competitive, but you don’t want to overpay for the property.
As a current homeowner you might just be curious about the value of your home. Keeping track of what’s your home is actually worth year over year helps you understand the trends in your market. So when you are ready to sell, you can take advantage of a good window of opportunity.
A trained real estate agent, who understands your particular neighborhood—can determine the true market value of your property … and at no cost to you!
THE THREE TYPES OF HOME VALUES
When buying or selling a home, you’ll frequently hear the words appraised value, assessed value, and true market value. It’s important to know the difference between each one so you can make better, informed decisions.
Appraised Value
A professional appraiser is in charge of determining the appraised value of a home. Lenders require appraisals when a buyer finances a property. And while the lender is the one requiring this information, the appraiser does not work for the lender.1 An appraiser is a licensed professional who is impartial to the buyer, seller, or lender—no matter who pays.
An appraised value assures the lender that the buyer is not overpaying for the property. For example, imagine a seller lists a home for $400,000. They reach a deal with the buyer to sell the home for $375,000. Should the appraised value come in at $325,000, the lender will not lend higher than the appraised value of $325,000.2
Appraisers will compare similar homes in your neighborhood. Evaluating, location, square footage, appliances, upgrades, improvements, and the interior and exterior of the home.
Assessed Value
Your local municipal property assessor determines the assessed value of your home. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.3
An assessor evaluates neighborhood homes sold, similar to the size of your home, age, overall condition, and improvements made. Assessors have limited information as they don’t have full access to your home.
Annual assessments determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. When the assessor determines the value of the home is $300,000, and the county uses a 70% multiplier, the assessed value of the home would be $210,000 for tax purposes.4
If your assessed value isn’t as high as you envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes. Let us know if you want to appeal your property tax assessment. We offer complimentary assistance and would be happy to help you build your case.
True Market Value
Real Estate agents establish true market value. It basically refers to the value that a buyer is willing to pay for the property. A expert real estate agent determines true market value because they have hands-on experience buying and selling properties. They understand what buyers want in your market and know what they’ll pay for a desirable house, townhouse, or condo.
For sellers knowing the true market value importance helps you choose how much to list your property for. It also helps you know any improvements needed to your home before putting it on the market. Your agent can help determine which updates and upgrades will have the biggest impact on your true market value.
WHAT’S THE DEAL WITH ONLINE CALCULATORS?
You may be looking for answers from Zillow, Redfin, and Trulia to learn what your home is actually worth? When you use an online calculator to determine your home’s value on these sites, it is just an estimate. These sites use their own algorithms for coming up with their estimates. Zillow comes up with “Zestimates” by calculating “public and user submitted data, calculating special features, location, and market conditions.” 5
Online estimates can be a great starting point to a conversation with your real estate agent about your home’s worth. Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site that after you get a “Zestimate,” you should get “a comparative market analysis from a real estate agent.”
It’s essential to have an agent involved in the process because they understand the market better than a computer ever could. They show properties in your city daily, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has buyers, they understand what every buyer segment in your market is specifically looking for.
HOW AN AGENT FINDS YOUR HOME’S TRUE MARKET VALUE
So, how does an actual real estate agent determine true market value to determine what your home is actually worth? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:6
- Neighborhood sales – Your agent factor recently sold homes prices and what they have in common with your house.
- The exterior – How does the house look when walking or driving?
- The interior – This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
- Age of the home – A newer or older home affects the list price as part of their assessment.
- Style of the home – The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
- Market trends – An experienced agent knows your area’s trends and what buyers are willing to pay for a similar home.
- Location, location, location – This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.
A computer algorithm simply can’t take all of these factors into account when calculating the value of your home. Nothing beats having a real estate agent or professional appraiser when it comes to determining a home’s true market value.
YOUR AGENT IS THERE EVERY STEP OF THE WAY
Determining a home’s true market value is a real estate agent’s forte. For seller’s, your agent will help determine your home’s market value so you can list it at the right price.
For buyers, your agent will help you determine the value for a fair offer and you don’t pay too much. They will set you up with an email search from the Multiple Listing Service of homes that meet your criteria. It will show what homes are available within your criteria and their pricing.
Get a Complimentary Report With Your Home’s True Market Value
Curious about your home’s true market value? Call us or fill out the form below to request a free, no-obligation Comparative Market Analysis to find out exactly how much your home is worth!
Sources:
- Chicago Tribune –https://www.chicagotribune.com/suburbs/chi-ugc-article-what-is-the-difference-between-market-value-a-2013-09-30-story.html
