Determining Your Home's Value
by Jeffrey D. Leiser
Determining your home's value, and setting a price, is probably
the most important step in selling your home. Why? Because if your home is
overpriced for your area, no matter what the cost of improvements that you have
made on your house, buyers will shy away from it.
On the other hand, an underpriced home will probably move on and
off the market because of a quick sale, but there goes your profit. So, to avoid
losing time and money, you must properly price and present your home.
1) The easiest way to determine your home's value is to pay for
an appraisal, and price your home close to the appraisal price. You can find
Residential Fee Appraisers listed in the Yellow Pages under Appraisers. For
about two to three hundred dollars, they will give you a by-unit (room to room,
fixtures, amenities; and square footage) comparison appraisal to similar
property in your area. The downside is it will cost you money, but the upside is
that you have in writing a professional appraisal on your home which you can
display to prospective buyers. This can be an added selling feature. But there
are other methods you can use, which won't cost you anything.
2) Another way to find out the value of your home is to
interview three or four real estate agents in your area. Of course, you will
need to decide whether you want to use a realtor, or whether you want to go "for
sale by owner." If you use a realtor, he or she can help you determine your
home's value, and the best asking price to set. But you may find yourself
saying, "Gee, if I sell my house myself, I can save thousands of dollars in
realtor commissions." If you would like to go it alone, you can find advice on
How To Sell Your House in Six Easy Steps at
http://www.paradoxpro.com/prdx.hosale.html
If and when you contact a realtor, talk to an agent directly.
Let him or her know up front if your intention is to sell your home yourself.
You can always use the agent anyway if you also intend to buy a home, since an
agent's services are free to the buyer. Usually you can get an agent to provide
a bit of information about your current home, as long is there is some
commission in it somewhere.
Ask the realtor for a CMA (Comparative Market Analysis) on your
house. You will need to supply the agent with information pertaining to your
house and the area. List the number of baths and bedrooms, and the total number
of rooms. Do not count the basement, garage or bath areas as rooms.
Next make a list of up to 10 roads within a half mile to mile
radius. Include your address, zip code and school district. This furnishes the
agent with all the criteria necessary to run a market analysis. A CMA consists
of the selling prices of the homes in the surrounding area that have similar
traits to your house. The comparable should cover a six-month to one-year
period.
Some web sites offer to provide a CMA. Many of them are based on
tax rolls, and often charge for the service. At one time, there were several
sites that allowed you to access the information anonymously, but a recent check
of over 100 sites in a leading search engine showed that today's sites require
you to provide either money, personal information, or both.
3) A third method of figuring your house's value is to determine
what your city or county has set the value at, based on your property taxes.
Let's say the property taxes on your house are $2000 a year and your tax base is
1 percent (this is a percentage in which local municipalities multiply their
estimate of the worth of your home to arrive at a yearly tax figure). The city
or county in which you live uses many methods to determine what they feel is the
worth of your home. To determine this estimated value, you need to multiply your
base by the yearly tax amount. Usually the value, your tax base, and the yearly
property tax amount are located on the same issued tax statement or bill.
$2000.00 x .01 = $200, 000.00 YOUR TAX BASE OF ONE PERCENT (.01) MULTIPLIED BY
YOUR YEARLY TAX OF TWO THOUSAND DOLLARS ($2000.00) = ESTIMATED VALUE OF YOUR
HOUSE, OR $200, 000.00.
The problem with this method is that there have been great
fluctuations in tax valuations in the past 20 years, and your property taxes may
or may not be a good way to estimate your home's value. Often it is best to try
each of the three methods, as a way to check each of the other methods for
accuracy.
Even the realtor's conditional CMA may not be on the money. This
is where a comparison between the information given to you by the real estate
agent and the calculated value of your home may help.
Let's say the agent tells you $310,000 is the average selling
price in your area for a house with similar square footage and features. Another
important factor is how long the houses stayed on the market before selling. A
complete CMA will include a brief description of each comparable home and the
days on the market before it sold.
Use the comparables to price your home, but if the market is
fair in your area (90 to 120 days on the market) deduct 2%, and for a poor
market (120 days or more), subtract 3%. Market movement is important. Likewise,
if the houses move really fast, you may be able to set your price slightly
higher. You want a starting price high enough to make the profit you want, but
not so high as to scare off buyers.
Be aware that none of the suggested ways of determining your
property's worth referred to in this text will guarantee the house will sell for
your calculated price. The marketplace is always the final word in regard to
actual profit you can expect and the speed at which your home will sell.
Jeffrey D. Leiser is the author of "You Can Sell Your House:
For Sale By Owner" which includes 10 forms and a 60 page guide, plus a bonus
report on salesmanship. Sell Your House in Six Easy Steps,
http://www.paradoxpro.com/prdx.hosale.html