How to Find Out What a House is Worth
If you're interested in finding out what a house is worth you have come to the right place! Typically, if you're looking for a house value it's for one of two reasons, you're either looking for personal information as you may be considering selling your home, or you're trying to estimate the equity in your home to prepare for a future sale. The other reason is you're interested in purchasing a new home but you want to do your own due diligence in researching the value of the home before you make an offer. In this blog, I will cover both!
Find a House Value to Prepare for a Home Sale
If you're considering an upcoming home sale the easiest way to get a true market value of your home is to talk with a trusted and local Realtor®. Realtors that work in your city or County generally can do the hard work for you. Most Real Estate agents will offer a FREE seller consultation or an online valuation free on their website. If you're in the early stages and just gathering data for a future conversation with a Realtor you can use sources that will review past sales in your area, and current homes on the market. Generally, you're trying to create a baseline or range where your home can fall into.
Taking a look at recent home sales and recent active properties will give you a general idea but someone experienced will evaluate the current real estate trends, the high and low points of the market, evaluate the best times to sell your home based on location and if it's a seller's market or a buyers market. A home evaluation takes in considering many factors not just current pricing but also past pricing. Depending on what is happening in the market some homes may not sell, an experienced Realtor will be able to determine why that is happening and make sure to guide you in not making those mistakes.
Not pricing your home correctly can be detrimental to your bottom line. In the Real Estate industry, we always strive to price a home competitively so that home can get the most exposure possible and obtain a buyer quickly. Overpricing the home could cause the property to sit on the market, become stale and otherwise be overlooked by buyers. In general, when a home is sitting on the market buyers will assume "something is wrong" with the home. Regardless, if it's true or not buyers tend to make their own opinions about a property before they ever step into the yard.
Third party websites such as Zillow and Realtor.com will show the property online and give statistics on recent sales and comparable properties. The worst part, online data will show how many days the home has been listed on the market. That's where consumers base their opinions on the property if there is something wrong with it, or if possibly the seller has unrealistic expectations about the value of their home.
Being able to view photos of the property make it easy for the buyer to see if this home, in fact, does have superior finishings or qualities that warrant a higher price point, or unfortunately, it just wasn't priced right in the beginning. Unfortunately, when homes are priced over market value, some buyer's will venture out to see a 'new' listing as the days on the market start to accumulate without any activity or an offer you can assume you may need to do a price reduction in order to regain ground with pricing and put your home back to fair market value. Overall, the longer your home sits on the market and the more price drops you make, the more the buyer is expecting to get a "deal" out of you. Long market time indicates you're likely ready for negotiations and likely willing to accept less than market value or less than the current market price possibly out of desperation. Obviously, that's not always true.
"Holding out" is what some sellers believe they're doing, when in fact, they're usually costing themselves money. If it's a hot seller's market and no other inventory exists, is it possible for a seller to get what they want... possibly! It is definitely a risk too. The solid advice is always to seek the assistance of a local Realtor for pricing. Preliminary research is also great to have on hand so you're prepared to discuss with your Realtor your expectations of price and where you believe your value is or should be.
Find Out What a Home is Worth to Purchase
It's a smart move to evaluate what a home is worth before making an offer on a home. Depending on if it's a seller's market or a buyers market the idea of overpaying may need to go out the window. In a general seller's market with low levels of inventory (like we're currently in), you may not feel like you're getting the deal or leverage that you would want or expect. No one wants to feel like they overpaid for anything. Reviewing comparables in the area you plan to purchase in, is an easy way to estimate where your offer either should fall or possibly what the seller might be willing to take for an offer.
Searching for similar type homes with the same square footage, bedrooms and bathrooms and age is a good reference to what the value range should be. Searching active and sold properties within a short distance can create an acceptable range for what would be considered market value. Again, use your Real estate agent to help you research properties and find an acceptable price range. Realtors can generally review current market trends and create an idea of how many offers could potentially be presented and how high offers can go with a hot property.
Focus your research on current sold homes and see how high over asking they went, what type of financing seems to be more accepted and your terms tend to go a long way with sellers when you're trying to get your offer accepted. In a high demand area, 3-20 offers can be presented on any given property. I have personally experienced offers going $15,000 to even $20,000 over asking price. That's why it's important to hire a local professional that knows exactly what is happening in the area you're trying to purchase a home in. Getting an offer accepted in a hot market against lots of competing offers isn't something a new agent should be doing. Find a Realtor that can get your offer accepted in a fast moving market and get you moving in!
Finding Out What a Home Could Appraise For
Regardless if you're looking for a home value to sell it or a home value to gauge how attractive your offer should be the key thing in any Real Estate transactions is to make sure the home will appraise once the offer has been accepted by the buyer or seller. A Real Estate agent is searching comparable homes that are currently active on the market and ones that have currently sold within the last 6 months. I do a little extra effort and review last years sales to see what the percentage of increase in pricing is year over year. This helps me to determine the patterns of home sales and the best times to get the most money for a sale and the best times to buy so you get the best or better deal than the hot spring market when buying. The reason I look at past sales is also to see where homes were appraised at. A Realtor is creating a fair market value for homes and an appraiser is coming back in and agreeing with the Realtor's work to justify the purchase agreement value and support or disagree with the value as it relates to the bank.
In fast-moving markets like the seller's market, we're currently in, low levels of inventory and high demand can increase the purchase price of the home by multiple offers. In doing so we need to convince the appraiser that due to the high interest in the property that value over market value should be supported when asking the bank for a loan. Now if you're planning to purchase a home for cash or an appraisal is not necessary you may not need to worry about the value of your appraisal.
However, if your home receives 10 offers and it's going $20,000 or so over list price in say a rural area or the home is over improved for the neighborhood and there is little comparables to support the value it's possible that the appraiser will not be able to justify the purchase price with your lender. In that case, it's up to the buyer and seller to determine if they can come to some sort of agreement on how to proceed forward as most buyers will want to renegotiate the purchase price as they don't want to feel like they over paid while the seller feels the buyer was willing to pay that price in order to get the home. It can be an issue that can't be resolved in which case the buyer and seller may decide to terminate the purchase agreement and both parties will then sign a cancellation and go their separate ways.