6 Simple Ways to Determine Home Value
April 11, 2020
Buying or selling a home is a big step for anybody.
It is often one of the biggest financial transactions that people conduct. The process can be daunting, intimidating, exhausting, and complicated. The paperwork, the jargon, the data, and the steps involved frustrate the common man. But it doesn’t have to be that stressful. We can help simplify the process for you. Let’s start by understanding what goes into the sale of a home.
There are a lot of factors that go into buying or selling your home. In selling a house, there are usually four steps involved:
A- Deciding to Sell
B- Selecting an Agent or Professional
C- Starting the process of Sale
D- Closing the Sale.
During this process, as a seller, you should be asking yourself, is there any way to achieve maximum value for my home? And the answer is yes. There are proven, simple, easy methods for sellers and buyers to maximize their advantage and profits. If followed correctly, you may be able to achieve optimum profit while selling a house. To understand how to gain profit, you will first need to determine your home value. That will give you a base point to set your expectations. Assessing that value is vital as it then determines your plan of action. Today, we shall give you six stunningly simple ways to determine home value.
1. Be Realistic
Suppose you purchased your home three years ago at Price X. There are a lot of variable factors that will affect your sales. As a seller, your first step is to be aware of those factors. You may be working with a professional, say realtor or agent to help you with the sale. They will be advising you, basing their strategy on the current market situation, economic stability, geography, state of the house, and so on. It is your job to be very realistic about the way to determine your home value. Homeowners who have invested a lot in their houses tend to overprice it, ultimately causing slow sales or, worse, no sales. Highly-priced houses will have to face price reductions, which can raise doubts or questions in the mind of buyers.
Keep your head clear by assessing your home as a product and not the emotional labor of love it has been for you. It is one of the most difficult things to accept, but remember to make a great sale, you have to market it well and be practical.
2. Do Your Research
Hiring a professional such as a realtor or agent is a sensible step, but it doesn’t imply that you leave everything to them. Familiarize yourself with the process of pricing a house. You can do so by identifying certain characteristics. Professionals call it ‘comparables’ or ‘comps.’ If your house is a townhouse, or an apartment, study townhouses or apartments sold in your neighborhood, town, or area. Look at the data of the past 3-6 months to get an accurate representation of numbers. Homes in the same neighborhood will usually have some similarities, for example, size, look, age, design, upkeep, and so on.
Three to four practical comps should be enough for sellers to compare. Once you have narrowed those down, notice the differences between those homes and your house. The number of bedrooms, total square footage, remodeled bathrooms, or kitchen or any visible, transformative difference should be noted.
It would be a shame if you don’t use the internet and existing data to help you make a better sale.
3. Study Existing Models
How is this different than doing research? Research is aimed at studying the groundwork, the market, and the background. To perfect your sale, to maximize your profits, and determine your home value perfectly, you will have to study models such as automated valuation models.
And we are here to help you do so. Automated valuation models (AVMs) gather existing data, use computing power, and take into account the market fluctuations to determine your home value.
There are various AVMS available free and easy for consumers to use. Redfin, Zillow are some of the popular ones, but there are many more lying under the radar. One important thing to note is, these AVMs are only to be used as a STARTING POINT. Like every method, they have their own limitations. Do not take the figure handed out by them as your bigger picture. There are a lot of factors that they can’t comprehend or take into account. That’s why you should know how AVMs function or work.
AVMs, like any software, are constructed in a similar manner. To give you a figure, they take into consideration geography, square footage, year of construction, and the number of rooms. The software usually requires publically available data which you can find on local or regional listing sites. Every AVM has its analytical method and they will also involve building cost estimates. If you study them accurately, you can predict the margin of error or inaccuracy based on your knowledge. To be on the safer side, use an AVM along with a local professional to give you the best home value for your house.
4. Setting a Base Price
You can’t sell your house for a profit if you don’t know or haven’t decided a base price. Experts suggest that you should aim at selling for anywhere between 5%-10% more than your estimated base or selling price. You can conclude a baseline price or selling price using different methods. The simplest way people use is looking at what they paid for it, X years ago. Then you could add your renovation cost, current market fluctuation trends, and reach an approximate price. The problem with this method is this is very subjective and could often lead to a distorted amount.
A sensible approach would be to use an AVM estimate (better to use an average from 2 AVMs). You could also depend on your agent, realtor, or professional to offer you a number. The practical method, as we mentioned earlier, would be combining both estimates (from AVM and the agent) to arrive at your baseline price. With this method, you can rely on 3-4 comps and 2-3 AVMs for their estimates. Based on this, you will have anywhere between 5-6 amounts for your baseline price. They will vary from highest to lowest estimates. Statistically speaking, your baseline selling price should be within 1 to 2 percent of those estimated amounts.
5. Be Flexible
In order to sell your home at a profit, you need to be flexible. There are tons of articles and information available for you on WHAT TO DO. But nobody tells you how to do it. That’s what we are here for. Common sense is of importance when you want to figure a value for your home. Professionals, internet, and books can claim you can sell your home for 50 percent over asking price. But we all know that’s unrealistic and very rare. You will also have to let go of certain notions and assumptions you have. The real estate market is a highly volatile one. Experts can predict trends and suggest ideas, but there is no FIXED guarantee on what will sell at a certain amount or not. Hence, as a seller, you must keep your options open and explore various avenues to arrive at your approximate value.
You will also need to get into the head-space of a buyer. What is he/she looking for? Is your home providing them the maximum value for their money’s worth? Is your sale allowing them enough moving space to have money for further renovations or furnishings? By being flexible, you will turn this sale into a wholesome, positive experience for everybody involved and thus end up with a good sale.
6. Understand All The Variables
You bought a beautiful townhouse with a scenic view some years ago. It was in a homely neighborhood and conveniently located. You were assured of its resale value. But, a developer builds a high-rise nearby, blocking your scenic view. The Recession came, forcing nearby residents to sell up and move quickly. These cheap homes were bought up in bulk and turned into condominiums for affordable living. Your scenic and stately townhouse is now next to a noisy high rise, blocks of similar flats or units, and surrounded by haphazard developments. This will cause a steep fall in its market value. Do you understand the power of variables? The current COVID-19 scenario will definitely cause ripples in the economy, which in turn will impact the real estate market. As a seller, your job is to understand all variables and factors that could cause positive or negative impact on your sale.
You can also cause an increase or decrease in your home value based on your financial or economical condition. Sellers in distress will pick time over money and take whatever amount they get, as we mentioned above. This suggests that price/money is only one of the variables used to determine home value. Somebody who is in no hurry or need or immediate finances could wait it out and probably demand more from a grateful buyer. Buyers would also be willing to offer more for furnished or renovated houses if the situation calls for it. That’s why it is vital that you pay attention to all the variables that could affect your negotiation and asking price.
These are some of the top 6 simple ways you can determine your home value. You may choose to try some or apply all ways to achieve your goal. However, they are best utilized when they all come together to give you the optimum price for your home. The beauty of these methods and these ideas is they can be safely applied to every kind of home and sale. While we understand that not every home seller will follow every recommendation, we can guarantee you that these methods will give you a clearer picture of your home value.
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