Let’s deal with a question that I hear quite frequently: How do I know what my home is worth? And that’s a fair question. When it comes time to selling your home, it’s important that you associate the correct value with your home. Allow me to explain some issues if you do not know how to accurately estimate this value.
Overvaluing vs. Undervaluing Your Home
If you value your home too low, if you place a number on it that’s not even worth what your house is worth, then obviously you’re not going to get the kind of money that you could get for your house. And you don’t want to lose that labor. You don’t want to lose the payments you’ve done. You don’t want to come out with the short end of the stick. So when you value your house too low then you have those issues.
And most people are familiar with those issues. But one thing that most people don’t consider is that there’s just as big an issue if you overvalue your property. If you take a home that’s worth $120,000 and value that property at $140,000, what’s going to happen is the buyer is going to come looking in your area, they’re going to realize that your house is overpriced, and as a result, your home is going to sit there on the market longer than it should.
Or you’re going to get low-ball offers. Because when people see that your house has been on the market longer than it should, they assume that it’s defective or that there’s an issue with selling it. And they see that as an opportunity to take advantage of the listing agent.
So what you want to do is to make sure that you find the exact value of your home. Don’t just pick a number and throw it out there. Find what your home is truly worth. Take the time to discover what the value is, and list it for that price.
Three Ways to Calculate Home Value
I’m going to give you three ways that you can discover the value of your house. A lot of people go with just one of these ways, but I recommend all three. I recommend that you take the three numbers, put them together, and you’ll have a better understanding of what your home is worth.
Now, the first option that a lot of people know about and go with is the appraisal. The appraisal is an outside organizational, a licensed group, that comes in and puts everything together. They compare the size of your lot the inside-outside sizes of your home. They take pictures and look at a bunch of details, then they compile a big list of things that contribute to the value of your home.
Now that is a very big thing to do. And it takes time and it costs a lot of money. If you have the time and you are willing to spend the money, I recommend you get an appraisal. What is important when you’re picking out an appraiser is that you understand an appraisal is not a science, it’s an art. In appraising, 2 + 2 does not always equal 4. You may take it to one appraiser and he may value it five or six thousand dollars higher than another appraiser. So when you’re looking for an appraiser, make sure you shop around and find the right one that is qualified to appraise your specific home.
Now the second thing that I want to bring up is the comparative market analysis or a CMA. In the the real estate world, a CMA is something that a realtor or a license real estate agent will do by pulling together active listings, recently sold, and pending listings in your area. They will try to figure out what the asking price is versus what the selling price is. So they can pull it all together and come up with an average market value or comparative market value to see what your home is worth.
Now the thing about a CMA is that typically this is a free service offered by any local real estate brokerage. So if you have someone that you’re interested in selling your property, ask them about the CMA. See if they will come out to your property to do a comparative market analysis and see if they can recommend a value for your home.
Now the third and final option is what’s known as a brokers price opinion or a BPO. These are usually offered at a small price anywhere from $50 to $250 depending on the value of your home and the brokerage you select. The broker comes out to your place and looks at a bunch of different options and factors and tries to figure out what your home is worth.
A Combined Approach
Now these are three separate options, and it’s always good to reach in different directions to find a good, true, accurate value. If you have the time and the money, go with an appraisal to establish the fair value of your home. But also contact your local realtor. Get them to do a CMA on your property and on your home to see what they might say your home is worth. And also go ahead and call the broker to do a PPO.
You can do one, two, or all three of these options. It’s up to you. However, I recommend using all three options to get a solid average for your home’s value.
The thing you need to understand is that if you don’t get you the value of your home right the first time, it could affect the sale of your house. It really could. If you price it too high and it stays on the market too long ,people are going to associate the picture of your house with too high a price, and they’re going to look right past it. You don’t want to do that. Because everyone wants to sell their house as quickly as possible for the most money that they can get.
If you have any more questions about how to sell it quickly and for the best value, reach out and let us help. And if you know people who might be selling their home, share this resource.
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