How Much Is My Home Worth?
Barbara Corcoran from Shark Tank once said, "The best investment on Earth is earth." This emphasizes the idea that real estate, and thus a home, can be a valuable investment. But how much is it worth.
How much is your home worth? You've probably seen that question before. It appears on all the most popular real estate websites. But how accurate is it? Can you establish a list price for your home using this? Do real estate agents use it when pricing their listings? Lets dive in and discover more! And what is the definition of value?
What Determines a home valuable?
Are these accurate estimates of a home's "value"? Lets think about that. What defines a home's value? Think about a home that is in a great commuters location. Or a home that is near a school. Or a home near emergency medical services. You can probably understand why someone who lives 50 miles from their job might value easy access to a major highway. Or why a home buyer with children would see greater value in a home near a school. And someone looking for a home with a family member who has serious medical needs would value a home near a medical facility, hospital, or emergency medical services. The value of a home to a buyer might not be fully based on what the market thinks its worth. The home owner might value the large back yard, central AC, 2 car garage, and finished space in the basement. So "value" can be an ambiguous moving target.
How About Market Value?
The "What's My Home Worth" feature on a real estate website is considered an estimated market value by the general public. This is often derived from recent sales in the area, property tax records, and some other public data that calculates market value. Lets explore an example. 9 Bradford Street, Derry NH has a "zestimate" of $552,400. Its currently listed at $529,000. Realtor.com says its value is $545,000. Redfin says $540,514. These could be an indicator of the market value, and may well be what the listing agent started with to calculate the list price.
Realtors Property Resource
Lets look at a tool that some Realtors use called Realtors Property Resource, or RPR. RPR provides two different values. First lets review an RVM. RVMs are estimated values generated by an automated valuation model that uses on-market and off-market MLS listing data, plus publicly recorded sold data, to provide an estimated property value. An RVM is the most accurate estimated value provide by Realtors Property Resourc.
RPR also provides an AVM. AVM estimated values are generated by multiple automated valuation models to provide an estimated property value. An AVM does not include MLS data (public record data exclusively), and may be less accurate than our RVM. A property will likely have an AVM instead of an RVM when not enough data is available or when proprietary criteria are not met.
RVMs and AVMs are available for single-family residences, condominiums, and smaller multi-family properties. RVMs and AVMs are updated twice a month. The RVM or AVM Confidence Score defines the level of confidence in a property’s RVM or AVM estimated value. A five-star rating is considered the highest confidence rating and zero the lowest.
The problem with RPR is it may not know there are significance problems with the home that could seriously reduce the market value. That mold in the attic, the water in the basement, and the leak in the roof may not be included in an RVM. And conversely RPR may not know the home owner put 800 square feet of finished space in the basement, an replaced all the carpet with hardwood floors.
Comprehensive Market Analysis - The Real Deal
A Comprehensive Market Analysis (CMA) is what any good Realtor is going to use to evaluate the market value of a home. We use a CMA to establish an estimated market value. Our first step is to visit the property, talk to the home owner, take some photos, and then go back to our office and get to work. After a thorough evaluation of the condition of the home, the features and sales appeal, and an analysis of recent sales, we develop a market value.
But What Ultimately Determines Market Value?
What actually determines the value of a home? The Market. Sounds a little anti-climatic huh? The demand from buyers determines value. Think of this. If you're kitchen catches fire you'd value a fire extinguisher quite a lot, right? But before the fire started how valuable was that extinguisher? It was hanging on the back of the broom closet door and you thought nothing of it. Demand, that's what determines market value. If 10 buyers are all seriously interested in a home listed at $500,000 it quite likely it will sell for more than $500,000. It might sell for $600,000. But if only one buyer is interested, its going to probably sell for $500,000....and quite possibly less.
Summary
When its time for our buyers to make an offer we're going to put on our thinking caps to create a suggested offer price. Sometimes a buyer tells us what they are going to offer. We are representing them and will submit any offer they want to make. When we advise a seller on a list price its much the same. We'll do our CMA but if the seller says I need to sell for $500,000, and our CMA says $450,000, we represent the seller and will list the home for the seller's price.
So what is your home worth? This is a good tool from one of our other websites. Give it a try! https://billydolloff.exprealty.com/seller/valuation
