If you’re thinking of selling your home, you may be fantasizing about the profit you’ll reap from the sale or calculating exactly how much you’ll need to pay off your current mortgage and have enough left over for a down payment on the next house.
Before your fantasies run amok, you need to realize that, while you can estimate the value of your home in a variety of ways, the true value is only what a buyer will pay for it.
There are several ways to get a strong idea of how much a buyer will pay for the property in current market conditions.
What Your Home Isn’t Worth
It can be confusing with various numbers floating around that indicate home value. Here are a few:
Property tax assessment
Each jurisdiction uses a formula to establish home values for a tax assessment, but this price rarely correlates with the market value of your home. Your tax assessment an be higher or lower than the current market value.
Homeowner’s insurance value
Insurance estimates are based on the cost of replacing your home without the land, so this value is skewed compared to market value.
Mortgage balance
Your mortgage balance simply reflects your home loan. The difference between your loan payoff and the market value of your home is your equity.
Neighbor’s home value
Even if your neighbor’s home is similar to yours, it’s not likely to be identical. A REALTOR® can help you evaluate your home’s worth in the context of other nearby properties.
Cost when you purchased the home
Regardless of how long ago you purchased your property, the value can fluctuate.
Desired value
If you’re listing too low you won’t get the full value. If you’re listing too high your house could sit on the market and eventually sell for less than if you priced it correctly from the initial listing.
Comparative Market Analysis (CMA)
A REALTOR® can do a comparative market analysis with recent market data to help you estimate your home value. When you sell your home, an appraisal will be required by the buyers’ lender, so keep in mind that your home has to appraise for the selling price or, depending on how your contract is written, you’ll have to renegotiate the sale or the buyers will need to come up with extra cash.
A CMA is both an art and a science. While it’s based on data, it also requires local market knowledge and intuition about which homes to compare and how to interpret the prices. REALTORS® will look for:
- Recent sales of homes that are similar to yours, preferably within the past two or three months, up to six months.
- Other homes currently on the market and homes that didn’t sell and were taken off the market to compare values.
- The number of bedrooms and baths, the condition of your home, the neighborhood, and the proximity to amenities.
While it may be tempting to list your home with the REALTOR® who tells you it can sell at the highest price, the more effective way to sell your home is to price it as accurately as possible from the beginning.
To learn more helpful tips or to find out more about what Century 21 Semiao & Associates can do for you, contact us!
