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How Much Is Your Home Worth?


Millions of you want to know the answer to one seemingly simple question: How much is my home worth?

Sadly, in many cases, the only simple answer is “much less than you paid for it.” (Go ahead, you can share your story in the comments. This should get ugly quick.)

But just how much have tumbling housing prices affected the value of your home? Or, if you don’t yet won a home—how can you tell if that house you’re eyeing is fairly priced?

I asked Sarah, an experienced real estate agent, to give us a crash course in how to estimate the value of your home, just like she and other agents do.

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How much is your home worth? If you want the honest answer: it’s worth whatever somebody will buy it for. How do you know how much somebody will pay? You have to figure out how much value they see in it.

Value, of course, is subjective. And that’s why real estate agents and banks spend so much time studying properties to ensure the price is right. So when you’re serious about knowing what your home is worth, you can and should use the same method the professionals do…a comparative market analysis (CMA).

A CMA is a common way real estate agents determine a home’s value through comparing it to similar properties in the area—without ever stepping foot inside the house.  This involves logging into the Multiple Listing Service and searching for at least three active, three pending and three sold properties in the same area with similar characteristics as the subject property. (These are often called “comps” because they’re comparable to your property.) The average of the sold properties is taken to arrive at an average market value for the subject property.

ESTIMATING YOUR HOME’S VALUE USING COMPS

You may not be a professional appraiser, but, realistically, you appraise things every day. For example, the last time you listed something for sale, you made a guess at what someone might pay for that item. You can do the same with a home. (Just don’t expect a bank to write out a loan for whatever you tell them your house is worth—they’re still going to pull a professional appraisal.)

Pull your own comps by looking up recent sales of area home sales with like number of bedrooms and bathrooms and similar square footage. You can get this info at your city hall or on sites like Realtor.com, but keep in mind free Web sites may not be updated or 100% accurate. The best comps are properties sold in the last month, although 90 days will do. Take the average of the sold properties you find, and then add to the value for any upgrades to your home (new kitchen, pool) and subtract for downgrades (no garage, small yard).

SEEKING PROFESSIONAL OPINIONS

If you need more than just a guess as to how much your home is worth, you can enlist a professional—either an appraiser or a real estate broker—to help you.

An appraisal is a professional estimate of value, most of which involve the appraiser visiting the property in addition to analyzing data like use restrictions and area market sales trends. According to the Appraisal Institute: “A written appraisal report generally consists of: a description of the property and its locale; an analysis of the ‘highest and best use’ of the property; an analysis of sales of comparable properties ‘as near the subject property as possible'; and information regarding current real estate activity and/or market area trends.” If you need an appraiser, the Institute offers a directory helpful for finding appraisers.

Similar to an appraisal, a broker’s price opinion (BPO) is an estimate of value done by a real estate broker. Unlike appraisals which can cost hundreds of dollars, many realtors will give you a BPO at no charge if they anticipate winning your business on a future sale.

Whatever you conclude about how much your home is worth, remember that the market will always correct you. Even the best estimate of home value—whether a professional appraisal or a do-it-yourself comp analysis—doesn’t replace the only way to value a home…and that’s to find out what somebody is willing to pay for it.

Is your home worth a lot more or less than you paid for it? Have you ever been surprised to learn the actual value of a property was different than what you guessed? Let us know in a comment.

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website RealtorSD.com.

Comments

  1. Unless you are planning on selling in the near future, why does it matter? Your home is NOT an investment, it is your home.

    • …But it is also an asset or potential asset.

      I like to know how much equity I have so that I can calculate my net worth and understand my options when making large financial decisions.

      Also, I’m a younger homeowner. I want to know when I can stop paying PMI, cancel escrow, or take a home equity loan.

    • Also, it’s important to know the value in case you refinance. My wife and I bought a house a couple of years ago with a 30 year mortgage. Well, now our income has gone up a tad, interest rates have gone down a tad and we’ve paid off all of our other debts so now we’re in the process of refinancing to get a 15 year loan. The value of our house has gone down a few thousand dollars and rather than doing an FHA Streamline, we had to do a full FHA which required a full appraisal. With an FHA mortgage, the loan-to-value must be less than 97.75%, so if the value went down too much, we would have had to pay more money up-front so that the principal would be low enough. Fortunately for us the value of the home was just high enough to match the balance of our mortgage.

      The disappointing thing about the appraisal, though, is that it was governed more by the other sales in our neighborhood than what was actually in our house. So the state of the art furnace and radiant barrier that we installed and the awesome fence that I built on my own…none of that had any weight in the appraisal.

  2. For me, I think our condo is around what we paid for it…. I bought it for 120k almost 2 years ago… but I then through a bunch of money into repairs, around 17k.

    So I’d say our home (condo) is worth what we paid for it without the repairs… but we are only around 8k in the hole for the time being…

  3. I’ve had a bunch of readers that seem to be using pillow.com to determine what their home is worth. What’s your impression of Zillow?

    • Zillow may provide a close estimate, but there’s no way that they could be completely accurate. No one from Zillow has ever come into my house to see what kind of remodeling or other improvements I’ve done.

      • I’m not sure remodeling or improvements matter much. We bought our house in 2008 and spent a year totally remodeling it. Every surface (wall, floor, counter, bath) was replaced, new appliances, doubled the size of the kitchen, added a covered back patio, and added a finished laundry room in the garage. Then we refinanced to a lower rate, so we had to have a new appraisal. The appraiser literally took what we paid, subtracted the percentage that the average home in our area had dropped by in that year, and arrived at what our house was worth. There is no place on the appraisal form for anything interior – just square footage, #of beds/baths, and size of the lot.

  4. we bought our condo for $187k in 2008 and based on recent sales in the neighborhood it’s worth probably $70k now.

    and enough with all the “it’s not an investment!” garbage. life happens. people need to move unexpectedly at times so yeah, the value is important.