Determining a Value for Your Home

Determining a Value for Your Home

From time to time it is important to come up with a value for your home. You might be checking your insurance coverage, thinking about remodeling, taking out a home equity loan, questioning your last tax assessment or getting ready to put your home on the market.

Despite what internet marketers would have you believe it is not as easy as point and click. You need to have a real live person look at your home, look at homes currently on the market or have sold, look at current market conditions and actually put pen to paper to come up with a value. In that light there are two options; a licensed real estate appraiser or a licensed real estate agent. Each is different in what they look at and how the information can be used.

A licensed real estate appraiser will look at your home and then compare it to homes similar to yours that have sold and closed. They typically look for homes that are geographically close to yours, are similar in structure both in style/layout as well as size. The appraiser will then make adjustments to the comparables to bring them in line with the subject property to mathematically arrive at a value for your home. They do take into account current market conditions but are looking at value based on today at this moment, and back 3 months. Though you may be told differently appraisals have some flexibility based on the purpose of the appraisal. Appraisals done on your home so that you may take out a home equity loan will typically be more generous than an appraisal done as part of the sales process. A simple explanation would be that the bank is loaning money to you based on your credit and good standing and taking the equity in your home as secondary. During a home sale the value would be more primary.

I have been involved with sellers who have asked me to sell their home and have been disappointed when I’ve shared with them that their homes value is lower than the value of an appraisal that they had recently received for a home equity line of credit. There is a good article in September 2005 Consumer Reports outlining this issue.

A licensed real estate agent would be able to provide a value, or price range through a comparative market analysis (CMA) also know in some areas as a Broker Price Opinion (BPO). Though real estate agents take into account many of the things that an appraiser does they are looking at it from a little different angle. Not only is an agent looking at what happened in the past, but they are also trying to look into the future so that they can help you as the seller come up with a price that will sell your home, given the current market conditions. Real estate agents look at homes that have sold, homes that are pending as well as homes that are currently active in the market. They also take into account current inventory, absorption rates, competition in your price range, stratification of the market, list price to sale price ratio as well as interest rates.

A typical house sale or purchase will require a CMA/BPO to help you price or make an offer on your home as well as an appraisal so that a loan can be issued. Some legal situations require an appraisal instead of a CMA. Real estate agents work closely with appraisers so should you need one just give your agent a call.

Updating you on the current value of your home is one of the many services your real estate agent can provide.

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