What's Your House Worth? 5 Ways to Find Your Number
By Laura Agadoni
If you're thinking about prepping your home for sale -- or have already decided to sell -- it's important to have a good sense of what your home is worth in today's market. Your real estate agent will pull comps -- or prices of comparable properties -- and go over the data with you. But there are things you can do on your own to determine your property value, such as getting a personalized estimatefrom a site such as Trulia.
Keep in mind that any time you ask, "How much is my house worth?" the figure your agent or Trulia's valuation tool gives is only an estimate of what your house might sell for. "There's no magic bullet," says Josh Moffitt, president of Silverton Mortgage in Atlanta. "Your home is really only worth what someone will pay." So you'll have to wait until you start getting offers to know.
Not only that, but a home's value changes all the time. Real estate markets fluctuate: Neighborhood school ratings go up and down, you may add a pool or rip down that screened-in porch, or the hoarder next door may finally decide to move (or not). These factors among many more may or may not be reflected by whatever method you're using to find out your home's worth.
With all that said, getting a ballpark figure helps give a pretty solid idea on how to price your home. If you start too high, you might not sell. If you start too low, you'll shortchange yourself. Here are five ways to answer the question, "How much is my home worth?"
1. Figure Out Your X Factors.
Finding out what nearby homes have sold for is a great starting point, but you should also figure in what Mark Clement, contractor and co-host of the interactive video show MyFixitUpLife, calls the x factor: improvements you've made that could increase your home's value.
Things such as adding a new roof or new insulation to increase your home's energy efficiency are wise improvements that make your house "better than that house down the street," Clement says.
And if the renovations don't increase the value? "At worst, [they] help [the house] move faster than the house quite similar to it down the block," he says.
Here's a formula offered by Steven Lambert, a Washington agent: "Most homes, even with all the bells and whistles, will fall within a 2.5 percent range of the average sold price both below and over the number." Lambert says to put comps in your area that have sold in the past six to 12 months into a bell curve. "This allows you to remove outliers on both the high and low ends and will produce a number that is very accurate for home valuations and market prices in a particular area."
2. Use an Agent in the Know.
Although you'll get valuable information from a site such as Trulia on what your house is worth, you'll also benefit from getting the opinion of a real estate agent.
"Technology is a great part of the pricing tool kit, but it does not supplant a knowledgeable real estate agent any more than being able to read a legal case study online obviates the need for an attorney," says Bill Golden, an Atlanta real estate agent.
Besides just inquiring, "What's my home worth?" ask for a competitive market analysis (CMA) to get the most accurate value of your home. A CMA "consists of the real estate professional analyzing active listings as well as recently sold listings that are comparable to your property in the immediate vicinity," says Matt Johnson, a Maryland agent. "The report is free and takes only about 20 to 30 minutes."
A local real estate agent can tailor the estimate based on their familiarity with the area. But how should you find the right agent for you? "Survey two or three of the most successful real estate agents working in your marketplace," says Edward Kaminsky, a Southern California agent. "State that you want a realistic price evaluation. Ask the agent what they think the home will actually sell for, not what they would list it for." This helps ensure the agent isn't inflating the price just to land you as a client.
3. Hire an Appraiser.
Although it isn't always wise to hire an appraiser when you're selling -- it costs about $400 -- in some cases you might want to, such as when you get widely different numbers from real estate agents.
If you want to go this route, "hire an independent appraiser that is familiar with the area," says Ross Anthony, a San Diego real estate agent. "They will be able to compile the relevant data and use their experience to make adjustments for various features and locations."
4. Know What Your Goals Are.
The price you set for your home could very well determine its worth. But if you don't care how long your house sits because getting top dollar is your goal, you can price it high and see whether you'll get that price.
"Ask your agent or appraiser what the range is on your house," says Moffitt. That way, you can price on the low end for a quick sale or on the high end if top dollar is your goal.
5. Price Based on the 3 Cs.
If you like recipes, here's a house valuation formula that could prove to be a winner. Just combine all ingredients:
Competition: It's important because "you'll need to know how many homes in your price range are on the market," says Texas real estate agent Sissy Lappin, co-founder of ListingDoor.com. Lots of them? Price aggressively. Not so many? You can price a little higher.
Consumption (or absorption): This refers to "the number of homes sold in a neighborhood per month," says Lappin. Use neighboring homes as a benchmark. If nearby homes similar to yours sell on an average of two per month, for example, and there are three such homes currently on the market, with yours making four, it should take you two months to sell if you price it about the same as the others.
Condition: Compare your home with the others on the market. "Evaluate your home the way a picky buyer would, and have honest expectations," says Lappin.