If you are like most people, at some point you’ve thought about selling your home. You’ve probably fantasized about the profit you’ll reap from the sale or calculated exactly how much you’ll need to pay off your current mortgage and have enough left over for a down payment on the next house.
Before your fantasies run amok you need to realize that, while you can estimate the value of your home in a variety of ways, the true value is only what a buyer will pay for it. That said, there are several ways to get a strong idea of how much a buyer will pay for the property in current market conditions.
What Your Home Isn’t Worth
Many homeowners find it confusing that there are various numbers floating around that indicate their home value. Here are a few:
- Property tax assessment. Each jurisdiction uses a formula to establish home values for a tax assessment, but this price rarely correlates with the market value of your home. Your tax assessment can be higher or lower than the current market value.
- Homeowners insurance value. Insurance estimates are based on the cost of replacing your home without the land, so this value is skewed compared to market value.
- Mortgage balance. Your mortgage balance simply reflects your home loan. The difference between your loan payoff and the market value of your home is your equity.
- Neighbor’s home value. Even if your neighbor’s home is similar to yours, it’s not likely to be identical. The Robin Group is a team of Realtors, ready to help you evaluate your home’s worth in the context of other nearby properties.
- Cost when you purchased the home. Regardless of how long ago you purchased your property, the value can have gone up or down, or both.
- Desired value. Some agents will tell you that you can put your home on the market for your desired price, but if you over-price it, your shortchanging yourself. Your home may end up sitting on the market for much longer than you expected and eventually sell for much less than if you priced it correctly in the beginning, or not sell at all. In the mean time you’ve been paying a mortgage on a home you no longer want, costing you more each month.
To help determine what your home is truly worth in the current market, your Realtor will complete a Comparative Market Analysis on your home.
A comparative market analysis pulls recent market data to help you estimate your home’s value. When you sell your home, an appraisal will be required by the buyers’ lender, so keep in mind that your home has to appraise for the selling price or, depending on how your contract is written, you’ll have to renegotiate the sale or the buyers will need to come up with extra cash.
A CMA is both an art and a science. While it’s based on data, it also requires local market knowledge and intuition about which homes to compare and how to interpret the prices. Realtors will look for recent sales of homes that are similar to yours, preferably within the past two or three months, up to about six months. In addition, your agent can look at other homes currently on the market and homes that didn’t sell that were taken off the market to compare values.
The comparison of your home with others does not just include the size and the number of bedrooms and baths, but also the condition of your home, the neighborhood and the proximity to amenities. If you do not understand the comparisons your agent is making, ask to see some of the homes currently on the market or look online at photos of the properties.
While it may be tempting to list your home with the Realtor who tells you it can sell at the highest price, a smarter way to sell your home is to price it as accurately as possible from the beginning. Studies show that an overpriced home that lingers on the market will end up selling for less than the estimated correct price.
To get the true value of your home, you need a local expert. Call Tiffani Robin at 504-509-4771 today and ask for a personalized CMA on your home.