What is the thing that a home buyer wants the most? The answer is to get a fair valuation of his money. And what is the thing that a seller desires the most? To get the best income from the sale of their property. And what is the best way to get the sellers and buyers on the same page? Determining the fair market value.
Knowing the true worth of the home is extremely important not only for the buyers but for the sellers too. If you are the buyer, you don’t want to pay more than what the fair market value of the home is. While if you are a seller, you don’t want the potential buyers to be silent if the list prices are wrong.
Here we will tell you about tried and tested ways to determine a home’s fair valuation. But first things first,
Why Find The Home’s Value?
Determining the value of the home helps give you an idea about its current value and profit. You will need to understand the ways through which the housing market works so that you can negotiate and get the best deal. A seller could get the information of a starting point when he lists his property for the first time. And if you are a homeowner, you will get to know about the cash or refinance opportunities.
Now, numerous ways exist to find the home’s value. But we have come up with the top 5 methods to get you through the same and get the best value for your home.
Online Valuation Tools
There are multiple home valuation tools that can take your game of finding the worth of your home a notch higher. You just have to search “how much is a home worth,” and you will witness a dime a dozen estimators that can make your work easy. These are shortly known as Automated Valuation Models (AVM), which will help get you a rough estimate of your property. The valuation tools will consider details like location, the number of bathrooms and bedrooms, and square footage for the determination of cost.
But here is the catch: Automated Valuation Models don’t give you a perfect figure. Many AVMs are only for marketing and lead generation purposes. Even if you have limited data, they will deliver a rough figure. However, if you have any second thoughts about selling a property, it fetches an excellent starting point because you get the results with the click of a button.
Comparative Market Analysis
Comparative market analysis, shortly called CMA, is a process of drawing out a detailed analysis of every home in the area existing in that particular area (where your property is lying) that has been sold in the last six months to a year. CMA varies from agent to agent. But a professional estimate should include –
- Similar properties having equal footage
- Similar style properties
- Listed price and sold price of each property
- Properties having the same number of bathrooms and bedrooms
- Properties located in the same area
Additionally, take into account the upgradation or decline in the cost of the property recently. There will be slightly overpriced properties in the seller’s market and slightly underpriced properties in the buyer’s market. Everything depends on the real estate market. You might be surprised to know that properties might not be overpriced in the seller’s market if the upswing is in trend. On the other hand, buying a home in the buyer’s market may become overpriced if the prices have recently been declining. So, having knowledge of the real estate market plays a key role. Besides, you should also be knowing how mortgage interest rates and the job market affects the economy.
FHFA Price Index Calculator
If you don’t want to use AVM but still want to get a quick way to determine a fair valuation of your home, the FHFA price index calculator may work well. It stands for Federal Housing Finance Agency. You can use the FHFA tool to follow a more scientific approach in comparison to AVMs. FHFA uses the method of repeat sales and includes thousands of transactions. So, you can also go for an FHFA price index calculator.
2 common approaches are followed by the appraisers to find out the estimated value of the property. The first one is the comparison approach, like CMA. An appraisal analyzes the cost of the similar houses existing in that area which are recently sold. They then make adjustments for different features.
The second one is the cost approach, which includes an estimate of how replacing or reproducing the improvements in the house will affect the cost. The appraiser then adds the cost to the land value to get the final appraised value.
Generally, the market experiences an upward trend during the spring or summer months. The reason being – parents want to settle before the opening of the schools. So, this gives you the perfect opportunity to increase the listing price of your home during the summer or spring season because more buyers will get attracted to your deal.
The above-mentioned tips will help you make informed decisions in any market and get you the best deal ever.