Pricing Your Home
Pricing Your Home
If you've ever watched "Antiques Roadshow" on PBS, you're already familiar with the concept of an appraisal. The idea is similar in the realm of real estate valuations. Each property is unique, and the appraiser relies on his or her general expertise and specific research to arrive at an opinion of value. Appraisals are an infrequent experience for most consumers, who consequently tend to have some misconceptions about the process and the results.
Myths and facts:
Myth: The primary purpose of an appraisal is to make sure the buyer doesn't pay too much for the house.
Fact: An appraisal provides valuable information for the buyer and the seller, but the appraiser's primary mission is to protect the lender. Lenders don't enjoy owning overpriced property any more than they relish lending money to irresponsible borrowers. That's why the appraisal takes place before the lender grants final approval of the buyer's loan.
Myth: Appraisers use a specific formula (e.g., price per square foot) to figure out exactly how much each home is worth.
Fact: keep reading>
Your home's market value is an important factor in a long list of financial decisions, including selling the home, refinancing your mortgage, borrowing against your equity, estimating your annual property tax bill, buying homeowner's insurance, calculating the expected return on remodeling costs, managing your other investments, estate planning and so on. The trick is figuring out how much your home is worth -- and remembering that how much you paid for it months or years ago isn't relevant to its current market value. It's not a bad idea to gather information from several sources and compare the findings, rather than relying on just one approach to home valuation.
Four suggestions to start:
1. Call a couple of REALTORS?. Even if you're not planning to sell your home right away, many REALTORS? will be willing to prepare a comparable market analysis (CMA) for you as a marketing service with the goal of getting your business whenever you decide to move. A CMA shows the prices of recently sold homes that are comparable to yours and the prices of comparable homes on the market... keep reading>
When the time comes to price your home for sale, you may be tempted to start with the price you paid for it, add a healthy markup and call it a day. Unfortunately, that strategy is unlikely to result in a true reflection of your home's market value.
Six strategies to help you figure out how much your home is worth:
1. Abandon your personal point of view. How much will a ready, willing and able buyer be willing to pay for your home? Buyers don't care how much you paid for the home, how many memorable moments you and your family shared in the home, how much cash you need for the downpayment on your next home or how much time and money you've invested in your home's hardwood floors, fresh paint, lush landscaping or other improvements.
2. Get a couple of CMAs. Invite at least three real estate agents to visit your home and give you their opinion of its likely selling price. Ask for a "comparative market analysis" (CMA), which shows the prices of comparable recently sold homes, on-the-market homes and homes that were on the market, but weren't sold. The on-the-market homes are the "competition" for your home... keep reading>
Homeowners have a seemingly insatiable appetite for information about the housing markets. "Are prices going up? How's the market? Is now a good time to sell?" they ask. Research reports and newspaper articles provide useful answers, but the information is usually buried in economic jargon. What is a "median price" anyway? What does "seasonally adjusted" mean? Does anyone understand "unsold inventory index?"
Median price. An oft-cited indicator of the strength and direction of a housing market, a median price is the midpoint of all the prices of homes sold in a given area during a specified period. Midpoint means half the homes sold for higher prices and half the homes sold for lower prices. The median isn't the same as the average, which would be calculated by totaling all the prices and dividing by the number of prices... keep reading>