For many people, their home is their most valuable asset. Home appreciation has been quite strong in most areas the past few years, so chances are that the value of your home has increased. Even if you don’t plan to sell in the immediate future, it makes good sense to know the worth of your home because it affects so many major financial decisions, including selling the home, refinancing, borrowing against the equity in your home and calculating how much homeowner’s insurance you need. Here are the most common ways the market value of your home is determined by the real estate industry, financial institutions, the government and others.
Comparative Market Analysis (CMA)
One of the many services that an agent can provide their clients is a Comparative Market Analysis (CMA). A CMA is a report that shows what properties similar to yours are selling for in the current market. Homes with approximately the same square footage, number of bedrooms and bathrooms, acreage, age, amenities and condition are selected for comparison in the neighborhood. A CMA can include homes that have recently sold and those that are currently for sale. Since much of a home’s value is based on the emotional impact it has on buyers, subjective selling points such as street appeal, interior décor and the layout
of the home may also be included.
A CMA gives you a quick overview of the market and helps you determine the correct price for your home if you plan to sell. Setting the right price before you list is critical to getting
the most for your home and selling it quickly. A home that is overpriced may languish for months and require multiple reductions in price. An under-priced home may sell quickly,
but for much less than it’s worth.
The appraised value of your home
While a CMA offers an informal market opinion of what a home would sell for, a professional appraisal provides a more detailed evaluation of a home’s value based on a certified appraiser’s knowledge, experience and analysis of the property. A professional appraisal is required by most lenders as part of the loan application process, and the appraised value determines how much a lender is willing to lend you.
Appraisers use a number of factors to estimate a home’s value, including the size and square footage, the condition of the home and neighborhood, construction quality and recent sales of comparable local properties. There is usually a fee charged for the appraisal. The appraiser’s report provides you with a detailed description of your home and the criteria used to formulate the valuation. Items commonly found in an appraisal report include:
Side-by-side comparisons of similar properties
An evaluation of the overall real estate market in the area
Notations on issues the appraiser feels negatively impact the property’s value, such as poor access
Identification of significant problems such as a crumbling foundation or fallen fence
An estimate of the projected sales time for the property
All these factors are used to calculate the appraised value of your home.
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 | The assessed value of your home.
Some people confuse the terms “appraised value” and “assessed value.” Assessed value is the valuation placed on your property by a public tax assessor, which in turn determines how much you pay in property taxes. The way assessed value is calculated varies broadly by region. In some cases, the assessed value might be the same as the appraised value. However it typically is a percentage, called the assessment ratio, that is less than the appraised value. An increasing number of towns and counties are posting assessed values online. Type in “assessed value” and your individual city or county name to search in your area.
Home inspections and maintaining the value of your home
Appraisers will note obvious problems they see in their report, but they do not do a detailed inspection of your roof, foundation, chimney, electrical system and other structural components. A professional home inspector will conduct a detailed investigation of your home to look for any health and safety problems, make recommendations and counsel you on repair options and maintenance. These health and safety issues are important whether you plan to sell your home or not. Regular inspections allow you to protect your investment by addressing minor issues before they become major problems. What factors affect the value of your home?
Many people will get an inspection when they are evaluating a purchase, but you might also want to consider the following factors:
- Location—If your house is in a desirable area, you’ll be able to get a higher price than you would for the same house in a less appealing neighborhood.
- Property—This includes the size, age and style of your home; number of rooms; size of the yard; topography and landscape of the lot; and the quality of construction.
- Condition — An attractive, well-maintained home will sell faster and at a higher price than a fixer-upper.
- Extra amenities—Updates and luxury extras all add to the value of a home. These include items such as a gourmet kitchen, extra bathrooms, finished basement or attic, walk-in closets, a spa, lavish landscaping, and a patio or deck.
- Market conditions—The price your home commands is influenced by local and national economic conditions, current residential real estate market demand, and available financing and mortgage rates.
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