Your home is worth whatever you are willing to sell it for and what another disinterested party is willing to pay; not a dollar more. The question now is How Do I Predict that Value? Can I look back in history? My neighbor sold his home for $250,000 three years ago. Too long. Can I ask my relatives? Sure, you can go them for heart surgery too, but would you? How can I find this mysterious number?
First let’s debunk the myth that you are looking for a number. Until you have a check in your hand you won’t know THE NUMBER. You are looking for a range of value that will attract a qualified buyer. There are several factors that buyers look at before making the decision to buy.
1. Location – proximity to work, school, shopping, recreation, neighbors and so on.
2. Condition – this one is tough because buyers are likely judging this factor with the first photo, drive by or 10 seconds through your door.
3. Amenities – Here is an endless list. What’s important to know here is that you need to have at least the same amenities that other homes in your market value range have, but not a bunch more.
I could list many more factors but they are fit into those categories. The other factors that will impact your value are current market conditions and the recency and location of similar sold properties.
In fact, this is the basis appraisers use evaluate you home value. While it is not a perfect method because every home is unique, it does produce a somewhat predictable pattern of value that buyers usually follow. That is what we are after!
First of all we need to find at least three homes that are similar to yours and compare them. The homes that are chosen should be similar in style, square footage, age, lot size, amenities, and neighborhood. We will only look at SOLD homes that are, ideally, within 1 mile of your home and that have sold within the previous 6 months. Sometimes that is not practicable so these guidelines can be stretched, but the best comparables typically fall into this criteria.
Now that we have chosen three to five properties to compare we will make adjustments to each one to make it look like the subject property. So a property with one less bathroom, for example, would get a plus adjustment for about $5,000. I know you are thinking “wait a minute, you said it was inferior. Why are you adding to that property?” Remember I said we are making the comparable look like the subject. That means that for that property to be exactly the same as your home you would need to install a bathroom in the comparable property – that cost is about $5,000. Each amenity and attribute is adjusted the same way until the final adjusted net value is determined.
Now that all our data is compiled and the adjustments are made on three or more properties a range of value will be evident. Now, according to appraisal standards, there must be two comparables that are higher in value and one that is lower. So for you this means that it is virtually impossible to have the highest priced house in the market, or for values to ever increase. For that to happen many times cash deals have to happen in the market place where no appraisal is required.
Nobody expects you to do a full appraisal on your home before you sell it so this same type of evaluation should be done by you or your Realtor before deciding on a price for your home. In this situation it is wise to also compare homes that are currently listed for sale. They may have distorted values or be distressed sales, which can drive the value of your home down, but they are also your competition.
Here is where you need to decide whether to be the best priced home on the market, or wait for the other homes to sell and hope there are enough buyers out there. Find the comparables, make the adjustments, choose a range of value and sell your home!
