How to Estimate Home Market Value in Real Estate
If you are considering selling your home or refinancing your mortgage, you need to have a good idea of the fair market value of your home. Fair Market Value is based on what someone in the current real estate market in your area would be willing to pay for your home, not what you think it is worth or what you paid for it. While this seems like common sense, many people are not objective when it comes to estimating the value of their home.
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Instructions
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Go through sold and current listings in your area to see what kind of features are commonly mentioned in the comments. Agents list these features because they have found that buyers find these desirable. Note which of them exist on your property.
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See how much more houses that have these features sold for than homes without them. You can also use your original appraisal to see how much "credit" the appraiser gave you for those features. If your home was purchased within the last few years, it may be safe to use most of the dollar figures.
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Find out the sale price for comparable homes within a one to two mile radius. Comparable homes share the same main features: age, number of stories, number of bedrooms, baths and garage spaces, lot size, square footage and the like. The more adjustments that have to be made to the price to accommodate dissimilar features, the greater the chance of making a mistake on the value. Use tax records and websites like Zillow, FrontDoor or your local MLS (Multiple Listing Service) to find comparable sale prices.
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Note the features that the comparable sold houses have that yours don't and vice versa. Make dollar adjustments to the values of the comparable homes, not yours. Add and subtract for the differences in features based on the figures you came up with. If you cannot come up with a figure for upgrades, ask friends and neighbors how much more they would pay to get a somewhat objective number.
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Avoid the "but my 'blank' is nicer" syndrome to justify the feeling that your house is worth more than comparables. "Nicer" is in the eye of the beholder and does not translate to more money.
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If in doubt, consult with a reputable Realtor who is knowledgeable about the homes in your neighborhood. You may even want to talk to a few to get a range. They can do a CMA, or Comparative Market Analysis, to give a reasonable estimate of value. A good agent knows what features buyers want and how much more they are willing to pay to get them.
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Consider spending the money on an appraisal from a certified and licensed appraiser. It will only cost a few hundred dollars, but will give you a solid house value that may save you money on listing time and ensure you are selling for a proper price. You can use the appraisal as a negotiating tool and the buyer can use it during the loan process, saving you on closing costs.
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Tips & Warnings
Remember it is not what you would pay for your home; it is what someone else would pay for your home. Spending 200 percent more for exclusive hand painted tile from Italy for your backsplash, exotic hardwoods or rare plants may be worth the extra expense to you, but not to a buyer. These features may make your home sell faster, but might not bump up the price paid by a buyer for your home.
