Home Valuation: What You Need to Know
A home valuation assesses your property’s value based on location, size, layout, access, or encumbrances. A valuation is ordered when the definitive value of a property is required for a property settlement, dispute resolution, or refinancing to name a few. Property or home valuation provides an unbiased view of the property’s actual value that can be relied on from a legal perspective. A written report is prepared on the property, and there is a fee charged for this report.
The Importance Of Pricing Your Home Right
The value of a home essentially is what someone is willing to pay for it. It also depends on the market and whether you are asking a lender, an agent, or a county tax assessor what they would list it as. However, when it comes to pricing a home, several different factors should be considered either by you or with an expert in the real estate field.
For starters, it is vital to know the market. The asking price should be within 10% of the average selling price for homes in your neighborhood. Of the sold properties in your area, the homes sold within the last months provide the best guideline for pricing. When a comparable property is located, it is essential to adjust your pricing according to differences between homes by looking at the number of bedrooms or bathrooms and if the house is outdated.
Another good place to start when coming up with the right price is using online valuation tools. Property transfers, deeds of ownership, and tax assessments are just a few tools that can be used to predict your home’s value based on other properties listed and recent sales in your neighborhood. Real estate sites like Zillow and Redfin offer home value estimators where you can get a home valuation online. These can be done by yourself, but it is always recommended you to talk to a local real estate agent to get more insight into an online home valuation.
Knowing the value of your home allows you to evaluate what you can afford for a future purchase, determine whether a listing is priced correctly, and determine how best to price your own home. Determining your home’s value gives you a greater sense of control over the process of listing a property.
How Pricing Affects Potential Buyers
Pricing your home can be one of the most challenging aspects when it comes to selling your home. If the price is too high, there is a chance it might alienate potential buyers and force you to lower the listing price. As with all buying and selling transactions, low or high supplies of homes can drive the prices up or down. When the supply of homes on the market is low, and the demand is high, that is considered the seller’s market. If this happens, bidding wars can occur. On the other hand, when the supply of homes listed on the market is high and the demand is low, that is considered a buyer’s market. When too many homes are listed on the market, home prices tend to fall and sit on the market longer than what sellers would prefer.
How Is My Home Value Determined?
When determining the value of your home, working with a REALTOR® is a good place to start. A REALTOR® can help by completing a CMA, recommending an independent appraisal if the property is unique, or setting goals to help your house sell quicker and for the right price. The process that many REALTORS® use to estimate the value of a home is called a Comparative Market Analysis (CMA).
A CMA includes information about comparable homes in your area. A good CMA can tell you what houses similar to yours are selling for, how long it is taking these homes to sell, and what homes sold for compared to their listing price.
To compare homes that are similar to yours, REALTORS® look for homes that are similar in size, location, number of bedrooms/bathrooms, home type, and recent selling prices. However, it is possible to conduct your own CMA to find comparable homes in your area. While CMAs provide a good base for a home valuation, it is also crucial to keep in mind that it may not consider every feature that would affect the value of your home.
Whether using a REALTOR®, online valuation tools, or an appraiser, determining your home’s value is an essential step before putting it on the market.
Income to House Price Ratio
For the most part, prospective homeowners can afford to finance a home that costs between two and two-and-a-half times their annual gross income. Another way of calculating if you can afford a home is to follow the 28%/36% rule. This rule means you should not spend more than 28% of your gross monthly income on home expenses and 36% on total debts, which can include your mortgage, student loans, or other types of loans, as well as your credit cards.
While your monthly expenses or debts can remain stable, unexpected situations can arise that require unplanned spending, which can impact your savings. A good rule-of-thumb is to have three months of payments, including housing and other monthly debts, in savings if a situation requires it.
Consult with an expert
As you can see, there are many factors to consider when determining your home value. If at anytime you feel overwhelmed by the process or just aren’t sure where to start, please consult with a real estate professional. At Corcoran Classic Living, our team of experienced REALTORS® can guide you through the process. If you’re ready to get started, please contact us.