What’s your home worth?
The easy answer, of course, is that it’s worth whatever amount you can get from a buyer.
The concept of a home’s “value” is subjective, and though you’re likely attached to your home and value it highly, you may have a hard time finding a buyer who agrees with a sentimentally high valuation.
Finding an objective real estate valuation takes time and (optionally) expert help. But what objective measures influence “value,” and how do you set a price on the worth of your home?
What Influences a Real Estate Valuation?
A real estate valuation is a calculation that uses available data on your home to determine its value. The best and most accurate valuations include several important factors:
- Home size: this is in total square footage
- Floor plan: this includes things like the number of bedrooms and bathrooms
- Amount of useable space: a house with a huge garage won’t sell for as much as a house with more liveable space
- Improvements or updates to the property: this includes things like an added pool, a finished basement, or new appliances
- Condition of the home: the closer a home is to move-in-ready, the more likely a buyer will pay top dollar for it
- Home’s age: older homes are more likely to need repairs and often sell for less
- Current market conditions: homes tend to sell for more in a seller’s market than a buyer’s market, though a buyer’s market can have its advantages
- Economic factors: this includes the influence of the broader economy, including things like employment rates or recessions
- Interest rates: both short term and long term interest rates can influence a buyer’s ability to afford a home
- Area comps: this means the sale prices of comparable homes in the area that have recently sold
- General location: this allows for the calculation of things like property task and risk of natural disasters
- Neighborhood: homes have better valuations in neighborhoods with better school districts and better access to shopping and recreation, for example
You can conduct your own unofficial valuation (see the steps below), but you’ll need an expert for more accurate real estate valuation methods. Let’s take a look at how the process works
1. Use Real Estate Valuation Tools Online
Called automated valuation models (AVMs), valuation tools use massive amounts of data to estimate your home’s value.
AVMs pull information from public records on your home, including things like deeds of ownership and tax assessments. They also use information about your home’s location, including recent home sales and current listing prices. All of this information is then combined using mathematical modeling.
You can find AVMs online through lender or real estate websites. These free real estate valuation tools are a quick and easy way to get a sense of your home’s value.
However, don’t forget that they’re designed to give an estimate rather than an official valuation. They also aren’t as accurate as the expert approaches lower on this list, as the data they work with is more limited (and it’s only as accurate as the amount of public data available on your home).
2. Use Your Own Comps and Research
Doing your own research can give you a fuller picture than what you might get from an AVM alone. You can start by pulling your own comps from nearby homes that are similar to your own.
This option also gives you an unofficial valuation, but it’s a good way to get a more accurate idea of your home if you’re not ready to pull in an expert. Try to find at least three comps to give you a realistic estimate. Don’t forget to find comps that are as similar to your home as possible given the criteria above.
You can find comps online using a number of free house value sites. Homesnap’s tool, for example, offers quick access to listing info for homes in your area, with sales history and more.
You can also do additional research using other valuation tools, like the Federal Housing Finance Agency’s HPI Calculator, which can help you understand how local home prices are fluctuating.
Beyond this, it can also help to be aware of the average home prices for your area. For example, a seller trying to value their home in Wake County, NC might want to look for more data on home sales. These average home prices would paint a better picture of the price range buyers in the area are looking for.
3. Get Help From a Realtor
Once you’ve tried an online estimate, it may be time to go with a pro. A realtor can help you balance a valuation that will attract a buyer with one that suits your home and goals.
A realtor will use a specific process called comparative market analysis (CMA). They’ll pull up data from recent comps in your area using the Multiple Listing Service (MLS), a real estate valuation database that realtors have access to. This database gives them information on properties for sale or pending sale in a specific area.
A realtor can be an ideal real estate valuation partner if you’re selling your house. A realtor can also give you a better idea of the accuracy of your own valuations, and tell you whether unique features of your home add or subtract from its valuation. However, you may not want to opt for this step if you aren’t yet ready to sell your home.
4. Work With a Professional Appraiser
Part of an appraiser’s job is to be impartial, researching objectively to provide an accurate account of your home’s value. An appraiser will visit your home in person to give an accurate estimate, and they’ll also look at recent comps in your area.
The advantage of using a professional appraiser is that their work is completely objective. Their appraisal can back up research you’ve already done, or your work with a realtor, and you can use it as a tool to explain to buyers why you listed your home at the price you chose.
The disadvantage, of course, is that an appraiser will cost you out of pocket—between $250-$400 depending on where you live. Be sure to get multiple quotes to find an appraiser that’s right for you.
Find the Valuation Strategy That Works For You
Depending on your goals, you can use any of these methods to find your real estate valuation—though as we’ve discussed, some are more accurate than others. As you work to plan your next steps, don’t forget to check out our other blogs for more ideas on the care and keeping of your home!