By partnering with a local market expert, sellers will avoid pricing their house out of the market (the kiss of death in real estate) and buyers will ensure they get a good deal on their next home.
So, how do you accurately calculate a home’s value?
After all, the value a home is assigned by its town or county and the one it’s given when it’s listed are often dramatically different from one another. Which one is accurate and what does it all mean? Read on to learn more.
After all, the value a home is assigned by its town or county and the one it’s given when it’s listed are often dramatically different from one another. Which one is accurate and what does it all mean? Read on to learn more.
Assessed Value vs Market
Value: What’s the difference?
When it comes to home value, you’ll often hear two terms, assessed value and market value.
A home’s assessed value
is often the lower number of the two, and is the value given by your
municipality or county. Investopedia defines assessed value as “the dollar value assigned
to a property to measure applicable taxes.”1 Although property tax
laws vary, assessors commonly arrive at this number by taking into account the
following:
● What
comparable/similar homes are selling for in your area.
● The
value of recent improvements.
● Income
from renting out a room or space on the property.
● How
much it would cost to rebuild on the property.
A home’s market value,
or Fair Market Value, is the price a buyer is willing to pay or a seller is
willing to accept for a property. A skilled real estate professional will
arrive at the value using a variety of metrics, including:
● External
characteristics, such as lot size, home style, the condition of the home and
curb appeal.
● Internal
characteristics, such as the number of rooms and their size, the type and
condition of the heating or HVAC system, the quality and condition of
construction, the flow of the home, etc.
● The
sales price of comparable homes that have sold in your area.
● Supply
and demand; that is, how many buyers and sellers are in the area.
● Location;
that is, the quality and desirability of your neighborhood and other community
amenities.
Why are these values often so different? An assessor usually estimates your property’s market value
during a reassessment or if you make a physical change or improvement to it.2
As a result, a property may not be reassessed for many years. While your home’s
market value may fluctuate with the market, your home’s assessed value is more likely to remain steady.3
What Determines a Home’s
Value?
You’ve likely heard the motto of real estate: “Location,
location, location.” This means a home’s value relies on its location. While
the home and structures on the property will likely depreciate over time, the
land beneath it tends to appreciate. Why? Land is in limited supply and a
growing population puts increased demand on the housing supply. As a result, values increase.4
Other factors that affect your home’s value include the
function and appearance of the property, how well the home and other structures
are maintained and whether the home is a lifestyle property, such as a ranch
style with mountain views or beach bungalow.
Ultimately, the best indication of a home’s value is the
overall supply and demand of the market. This is why we recommend you partner
with a real estate professional who takes all of these factors—the assessed value, local market conditions,
home features and has physically walked through and experienced your home— into consideration to determine the most accurate market value.
How to determine if a
property is comparable to yours.
Both assessed value and market value are partially determined
by the sales price of similar, or comparable, homes in the area. To determine
if a home is comparable to yours, look for the following characteristics:
● Lot
size
● Square
footage
● Home
style or similar architecture
● Age
● Location
While you may not find a home with the same exact
characteristics as yours, you’ll likely find a few that are close. To account
for any disparity, adjust the sales prices of the comparable properties. Look
at the differences between your property and the one in question and determine
if the differences increased or decreased the sales price and by how much. For
example, if your home has two bathrooms and a similar home only has three,
estimate how much that extra bathroom increased the sale price of the similar
home. The adjusted sale price is the estimation of what
the property would sell for if the properties were exactly the same.2
Where can you find
comparable sales?
● Your
local assessor’s office is able to provide a list of recent sales you can
browse and compare or a sales history of a particular house, home style or
neighborhood.
● Your
municipality. Many cities keep local sales information in their offices or post
it online.
● Online
databases, such as a real estate database
● Your
local newspapers may offer some real estate information in the form of
quarterly sales reports in the business or real estate sections of the
newspaper.
● Our
office. We regularly do Comparable Market Analysis of homes in our local area.
How to calculate your
home’s value.
By answering a few questions about your home, property and the
local market, you can begin to estimate your property’s value. We’ve also
included a worksheet for you below...
Home Value Questions:
When was your home last assessed?
What was its CMA assessment value?
What is your area’s average sales price?
What is your area’s average price/square foot?
Structure:
● Is
the architecture and exterior structure of the home consistent, superior or
inferior to other homes in the area?
● Does
the era or genre (Modern, Victorian, Ranch, Cottage, etc.) add a premium based
on current design trends?
● How
does the floor plan and room size proportions of the home compare to other
homes on the market?
Interior Structure:
● How
does the kitchen compare to others on the market?
○ Updated
or outdated
○ Floor
plan
○ Appliance
packages
● How
does the Master Suite compare to others on the market?
○ Size
○ First/second
floor
○ Updated
or outdated
○ Access
to Master Bath
● How
does the Master Bath compare to others on the market?
○ Updated
or outdated
○ Shower
and bath
○ Flooring
Outside Areas:
● Are
there views, outdoor living areas or recreational areas?
○ Pools
○ Ponds
○ Patios
● How
does the landscaping and hard-scaping compare to the market? (e.g., built
elements such as walkways, patios, decks, etc.)
Overall Condition of
Home
● What
is the level of repair needed to compete with other homes?
● Does
the home need to be staged? How does it show?
● What
curb appeal projects are necessary to be consistent with others on the market?
Home Assessment Worksheet
If you want to
accurately assess a home’s value, it’s crucial to know about the market
activity of our local area. We can help! Give us a call to get the scoop on the
local market.
2. New York State Department of
Taxation and Finance https://www.tax.ny.gov/pubs_and_bulls/orpts/mv_estimates.htm
4.
Investopedia, http://www.investopedia.com/articles/mortgages-real-estate/08/housing-appreciation.asp?lgl=myfinance-layout
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