What Is Your Home Worth? Determining Your Home's True Market ValueIn today’s connected world, we gain access to seemingly everything with just a click, tap, or swipe of our fingers! But
What's Your Home Worth? Determining Your Home's True Market Value
What Is Your Home Worth?
Determining Your Home's True Market Value
In today’s connected world, we gain access to seemingly everything with just a click, tap, or swipe of our fingers! But determining the value of a home is not always so simple...
As a seller, knowing your home’s 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 if it's priced too low you could end up missing out on a good chunk of money. 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 may just be curious about the value of your home. Plus, keeping track of your property's worth year after 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.
THE THREE TYPES OF HOME VALUES
When you start the process of 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 informed and knowledgable decisions regarding your property.
These appraisals are performed by a professional appraiser and are typically required by a lender when a buyer is financing the property. It is important to note that while the lender is the one requiring this information, the appraiser does not work for the lender.1 Your appraiser should be an objective, licensed professional who doesn’t have allegiance to the buyer, seller, or lender—no matter who is paying their fee.
The value determined by the appraiser assures the lender that the buyer is not overpaying for the property. For example, a seller may list a home for $400,000 but
In order to establish an appraisal value, an appraiser will compare the property to similar homes in the neighborhood, and evaluate factors such as location, square footage, appliances, upgrades, as well as the interior and exterior of the home.
The assessed value of a home is determined by your local municipal property assessor. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.3
To come up with this value, your assessor will evaluate what comparable homes in the neighborhood have sold for, the size of your home, age, overall condition, and any improvements or upgrades that have been made. However, most assessors don’t have full access to your home, so their information is limited.
Assessments are done annually to determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. So, if the assessor determines that the value of the home is $300,000, but 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 worry. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes.
True Market Value
True market value is established by your real estate agent and refers to the value that a buyer is willing to pay for the property. A real estate agent is an expert in determining true market value because they have hands-on experience showing property in your city, and in your neighborhood, every single day. They have a working knowledge of the preferences and particular mindsets of buyers in your market and know what they’ll pay for a desirable house, townhouse, or condo.
As a seller, knowing your true market value is important since it helps you choose how much to list your property for. It can also help you decide if you want to make any improvements to your home before putting it on the market. Your agent can help you figure out which updates and upgrades will have the biggest impact on your true market value.
HOW AN AGENT FINDS TRUE MARKET VALUE
So, how does a real estate agent determine your home’s true market value? 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:5
Location, location, location: How popular an area is, how safe it is, and how good the schools are.
Neighborhood sales: Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for.
The exterior: Factors include curb appeal, home-style, lot size, and public utility accessibility.
The interior: Square footage, size
andnumber of rooms, the condition of appliances, and energy efficiency.
Age of the home: Whether the home is a newer build or an older home.
Supply and demand: The number of buyers and the number of sellers in your area.
WHAT’S THE DEAL WITH ONLINE CALCULATORS?
When figuring out your home’s value, you might be tempted to see what popular real estate sites like Zillow, Redfin, and Trulia have to say. When you use an online calculator to estimate your home’s value on these sites, please remember, it is just an estimate. These websites each have their own algorithms for coming up with their home value estimates. Zillow, for example, comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” 6
These online calculators can be a great starting point for opening up the conversation with your real estate agent about your home’s worth but should not be used as a replacement for a professional’s expertise. A computer algorithm simply can’t take all of the outside factors into account when calculating the value of a home. The reality is, nothing beats the accuracy of a real estate agent or professional appraiser when it comes to determining a home’s value.
Get a Complimentary Report With Your Home’s True Market Value
Curious about your home’s true market value? Contact us at 202-550-8380 or email firstname.lastname@example.org to request a free, no-obligation Comparative Market Analysis to find out exactly how much your home is worth!
Wendy Messenger is the Principal of Living by Design and has had a passion for Washington DC real estate since she made her first investment in 2007. She applies her distinctive background in project ....
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