What’s my home worth?
January 7, 2009 – 2:28 pmI get this question a lot, especially now that the market is all over the place. Although there are literally 1000+ websites that will give you “an answer,” it pays to remember several key factors effecting the numbers.
- Computer generated Home value estimates are based on averages of other, similar homes in your area that have sold within the last 6-9 months.
- Not all homes are the same but the computer programs cannot usually see the differences. In other words, a 3 bed, 2 bath home at 1500 squarefeet looks the same as any other 3 bed, 2 bath 1500 sqft home in the same neighborhood. Trulia, Zillow, House Values.com don’t allow for amenities like fenced in yard, 2 car garage vs. 1 car garage, on the water vs. inside lots, etc.
- What sold 6 months ago for $200 per square foot may be now selling for $180 per square foot but the computer will still show $200 per square foot as the average price.
- Average Sale prices do not reflect buyer preferences. So if you have an out-dated closed-in orange and green kitchen, buyers will probably value it less than a modern, updated kitchen.
- Appraisals are more accurate than Computer Generated Comparables but they differ in approach depending on the appraiser. Although all appraisals are based on the same mathematical formulas, appraisers are people and naturally range in approach and interpretation. Ask any mortgage lender and they’ll tell you there are appraisers that appraise high and others who appraise low. Just like some doctors over prescribe and others refuse to give you an aspirin.
- Appraisals can fluctuate in response to market trends. I”ve noticed trends in appraisals over the years that suggest that in a market going up, appraisers will have a tendency to value homes more generously. In downward markets, they’ll get more conservative.
- Appraisals can vary depending on the purpose of the appraisal. During a booming market, refinancing appraisals valued homes too generously at times, while now they may go ultra-conservative with the numbers.
- To the bank, an appraisal is interpreted as an amount of risk. The riskier the market, the more variance in the appraisal.
So what do you do? Get a REALTOR to run a Comparable Market Analysis using only the comparable houses that most closely match yours. Also ask them for an honest assessment of the direction of your particular market, your neighborhood, not just your zipcode.
Another really good tool is a Sales Ratio. That gives you the odds of selling your house at a particular time frame in the market. This is based on percentages of houses for sale vs. houses sold. Sometimes this is the best indicator of not only what your house is worth, but whether it’s going up or down in value.
And of course, the best part about getting a REALTOR involved is that it’s free to you. If you’d like an honest estimate of value on your house, give me a call. I’d be happy to run the numbers for you.
