What’s The Market Value of my Home?

The meaning of “market value” can be confusing. Many homeowners quickly pull out their last property tax assessment or their last refinance appraisal.

Real Estate Market value can be defined as the probable price that a property will sell for after allowing for a reasonable marketing time.

Market value is ultimately the price at which a buyer is willing to purchase it for and -the seller is willing to sell it for! Determining market value is a complex process.Many factors can influence the market value of a home such as location, condition and improvements.

This is important to know because with the invent of the Internet we are bombarded by web based valuation companies, such as Zillow and the Housevalues dot coms. The consumer is attracted to these sites because they believe that they can obtain the market value on their home without the need to contact a real estate agent.

In reality, a computer cannot determine home value. A computer cannot take into account the condition, upgrades, lot characteristics and exact location, all of which affects your home value.

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In determining your market value, these considerations must be made:

Location

1. Your Home & Neighborhood

When you determine market value, you must consider the location and neighborhood as the starting point for your research. The exact same house in the next city, or even on the other side of the same city, is not relevant to your determination.

For example, a house located in Bellevue or Mercer Island could be worth one million dollars, but if the exact same house were located in Everett it might be worth only $500,000. That’s still a hefty price. But it’s an astounding 50% less.

House prices throughout the country fluctuate significantly from city to city and from neighborhood to neighborhood. Therefore, whenever you determine the market value, you must compare it only with similar houses in the same or nearby neighborhoods.

Condition

2. Current Condition

Next, you must assess the current condition of your home. The current condition affects the amount of time the house remains for sale on the market before it is sold and ultimately the final sales price.

Has your home been well maintained and is it ready to move into? Or is it a fixer-upper that needs a major renovation?

Simply subtracting the amount of estimated fix-up costs from the selling price of other similar houses in the same neighborhood is not an accurate way to determine current market value for a particular house. If a house in good condition could sell for $300,000 and the house you are interested in needs $10,000 worth of repairs, that does not necessarily mean the current market value of your house is $290,000.

Here’s why: Few buyers want to buy a house that is in poor condition. When a house attracts fewer buyers, it takes longer for the house to sell. To attract buyers, the price may have to be reduced by much more than simply the cost of repairs. Sellers sometime neglect to consider not only the cost of the repairs but the time and inconvenience to the future homebuyer while the repairs are being made. The homebuyer can perceive this as a monetary issue as well. Generally, home buyers do not want to “inherit prior sellers’ problems”. We call this the “monetary headache value”.

The current condition of your home is one of the most important elements of market value, (even more so than square footage). There is no exact formula to determine exactly how much the condition of the home affects its value. However, as a general rule, you should be fairly safe if you subtract two to three times the amount of the fix-up costs.

Market

3. Time on The Market

In a “normal” Puget Sound real estate market, if a house doesn’t sell within 60 days, the reason is simple:

The price is too high.

Even perfect houses don’t sell within this time frame if the price is too high.

The best scenario is having a sale in the first 30 days. Statistics show us that most of your showing activity happens in the first two weeks.

This is the most important time to be priced right.

Many sellers make the huge mistake of pricing high because “we can always come down”. The longer a home sit “unsold” on the market the less attractive it looks to buyers. It becomes shop worn. Buyer’s perceive there must be something wrong with it if nobody else will buy it.

Value

4. Prior Appraisal or Property Tax Assessment.

Some sellers make the mistake of believing that their last appraisal is the market value of their home. Unfortunately what they don’t know is that the refiance appraiser has a different motive to appraise the value of your home.

The approach to the appraisal is first: The lender wants your business. If you desire to refinance your home and pull out equity or perhaps pay off other debt, their motive is to appraise your home as high as possible, without putting the lender at risk of course, in order to loan you the most amount of money they can or you need.

Therefore the appraiser specifically looks for higher priced sales in order to support your refinance. This is not reality in terms of “the current real estate market” They do not take into account what current homes on the market are selling for today that will be your competition.
The property tax assessment done by the County has an entirely different approach as well as formula. Your property tax assessment should always be lower than market value. You are not taxed on 100% of your market value.

Zestimates?

5. Don’t Rely on Zillow!

Many sellers visit Zillow to see what they say their home is worth. Relying on their algorithms could cost you thousand $$$ of dollars! The reason is that a computer just can’t put together a bunch of internet data and come up with a value because it hasn’t seen your home. It hasn’t seen your improvements. It hasn’t seen your condition.

And most importantly because Zillow admits their property values are off. And are off alot of $$$. According to their website they say:

“Half of the Zestimates in an area were closer than the error percentage and half were farther off. For example, in Seattle, Zestimates for half of the homes are within 6.2% of the selling price, and half are off by more than 6.2%.”

So they admit that 50% of time time they are off by more than 6%! On a $400,000 home that would be $24,000 or more!