Determining Your Home’s Value
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 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.