For most of us, our home is the single biggest investment we’ll ever make. As such, it’s wise to assess the value of your property from time to time. Of course, the value of any home fluctuates based on market conditions and other factors. So how do you determine the current market value of your home?
First you need to understand that the value is not based on what you initially paid for your home, how much you’ve spent to maintain or improve it, or the fact that your brother insists he would pay a specific amount for it if he had the money. The current market value is defined as “what a willing and able buyer would pay for it right now”.
There are consumer-friendly websites that provide a general idea of your home’s value. The most popular are Redfin, Zillow and Trulia. With an average of 150 million monthly visitors, Zillow is the leading platform. Zillow uses a proprietary automated valuation method that applies algorithms based on available data from tax records and sales data pertinent to your property’s location to calculate your home’s Zestimate. You can type in your property address and you’ll get a “Zestimate” of your home’s current market value.
Is it accurate? A realtor who’s looked at many, many Zestimates, I’d answer that question this way: Yes and No. Sometimes and often. Way off and dead on. Zestimates are created by automated software that uses algorithms to crunch available data to estimate a specific home’s value. And since every property is unique but that uniqueness cannot be filtered into the calculation, there’s really no way to accurately estimate a property’s market value using an automated process.
A better way to determine your home’s value is through a licensed real estate agent. An agent has a wealth of real-time and accurate data at their fingertips in the Multiple Listing Service (MLS)—and a knowledgeable and diligent agent can set up very specific search criteria, and then mine that data to come up with an accurate estimate of your very unique home’s value.
Your agent will start by doing a Comparative Market Analysis (CMA) which involves looking at comparable properties (comps) in the neighborhood that have sold in the last six months. Your property is the “subject property” in this analysis and comps that most closely match your house in size, age, lot size, roof type, amenities and style become the comparable properties.
Starting with the final sales price of each comp, the agent will adjust that price by adding or subtracting valuations of the difference between the subject property and the comp. If, for example, a comp has three bathrooms and the subject property has only two, the agent needs to adjust down the sales price of that comp so that it is more in line with the subject property. If a comp property has four bedrooms and the subject property only has three, the sales price of the comp will be adjusted up to be in line with the subject property.This analysis will give you a fairly reliable range of value for your home within which you would decide on a listing (sales) price.
The listing price, while valuable, is only an estimate of real market value. A seller may list his property for $325,000. A buyer might offer $310,000. If the seller accepts the buyer’s offer, the market value is $310,000—the price to which both parties to the transaction agreed.
The most accurate value is the “appraised value”. Unless someone can purchase your home with all cash, a mortgage lender will bring in a licensed appraiser to determine appraised value. An appraisal is more detailed than a realtor’s CMA. In addition to evaluating recent property sales and general home features, the appraiser will tour the home and factor in the current condition and age of things like the roof and HVAC.
It boils down to this:
• Zestimates are free and will give you an indication of the market value of your home, but are not deemed to be reliable.
• A competent real estate professional can prepare a CMA that is a much more reliable and accurate valuation of your home. While it takes time to properly do a CMA, agents will often do this for you at no charge as it’s generally part of their service when you list your home with their broker. A CMA will give you a very close approximation of the market price of your home.
• The appraised value is the most accurate assessment of what your home is worth. But an appraisal is not cheap. It’ll typically cost you between $600-$1,000 and since it’s only a snapshot at the time it’s done, it quickly becomes outdated.
If you’re thinking about listing your home for sale and live in Columbia or surrounding areas, feel free to reach out to me personally. I live and work here and would love to help you.
Ruth Lyons is a realtor with Sachs Realty in Columbia. She’s been investing in real estate for decades and she works with both buyers and sellers. She loves demystifying the process so everyday people can buy and sell homes with confidence. You can reach Ms. Lyons at 443-745-4806 or rl@sachsrealty.com