Value and Price
What Is A Home Worth?
What's a house worth?
Definitions
How is the price set?
What is the difference between market value and appraised value?
What is the difference between list price, sales price and appraised value?
What is the difference between list and sales prices?
How is a home's value determined?
What are the standard ways of finding out how much a home is worth?
What standards do appraisers use to estimate value?
Can I find out the value of my home through the Internet?
Will a neighbor problem reduce the value of my property?
What Is A Home Worth?
Several factors, including the state of the real estate market, property location and condition, and interest rates, contribute to a homes worth. Ultimately, a home is worth what someone will pay for it. All homes have a price, and sometimes more than one. There is the price the owners would like to get, the value buyers would like to offer and a point of agreement, which can result in a sale.
When considering home values, several factors are important:
- The value of a home relates to the local sales market. The exact same home in a different neighborhood may likely have a different value.
- Supply and demand is also a determining factor of home values. A home located in a community with an expanding employment base, growing population and limited housing, will see more appreciation. Homes located in an area that is seeing a decline in jobs and many homes for sale will create more of a buyer's market.
- A homeowner's motivation for selling can affect a home's value. If an owner must sell quickly, then he/she will have less leverage in the marketplace.
- Home value is not determined by the homeowner's needs. If the listing price is based upon the seller needing certain proceeds, and not on the marketplace, a too-high price can be the result. When a home is overpriced compared to similar homes in the same area, buyers will quickly decide that the home is unfairly priced. The list price or offer price is only one part of the deal.
- Consider all that is being offered. A home that is listed a little higher may include seller concessions that make the home more affordable for a buyer. In some cases, an offer from a buyer may be at a higher price, but include; allowances for repairs, discount points or contributions to closing costs, or longer terms, etc.
All real estate transactions are unique and there is almost always flexibility in the marketplace. How much flexibility depends on local conditions.
What's a house worth?
A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis.
An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about $300.
A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.
Definitions
List Price The list price is how much a property is advertised for and is usually only an estimate of what a seller would expect to receive for the home.
Sales Price The sales price is the amount a property actually sells for. It may be the same as the listing price, higher or lower, depending on market conditions and how accurately the home was originally priced.
Comparable Market Analysis A CMA is an informal estimate of market value, based on the sale of comparable properties, prepared by a Realtor. This report will compare recent sales of homes in the same neighborhood, of similar size and style. Most Realtors will provide you a Comparable Market Analysis free of charge.
Appraisal This report is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider several factors when determining a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. Appraisers also take lot size, topography, view and landscaping into account. Appraisals usually cost between $300 and $400. For detailed information on appraisal standards, contact: The Appraisal Institute 875 N Michigan Avenue. Suite 2400 Chicago, IL 60611 (312) 335-4458
How is the price set?
It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood.
A so-called comparative market analysis provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old).
If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.
What is the difference between market value and appraised value?
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $300 to $400.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
What is the difference between list price, sales price and appraised value?
The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount of money you as a buyer would pay for a property.
The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.
What is the difference between list and sales prices?
The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions.
If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property's listing period.
How is a home's value determined?
You have several ways to determine the value of a home.
An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house.
A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes.
Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.
What are the standard ways of finding out how much a home is worth?
A comparative market analysis and an appraisal are the standard methods for determining a home's value.
Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet.
An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.
What standards do appraisers use to estimate value?
Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value.
For detailed information on appraisal standards, contact the Appraisal Institute at 875 N. Michigan Ave., Suite 2400, Chicago, IL 60611-1980; (312) 335-4458.
Can I find out the value of my home through the Internet?
You can get some idea of your home's value by searching the Internet. A number of Web sites and services crunch the numbers from historic public records of home sales to produce the statistics. Some services offer an actual estimate of value based on acceptable software appraisal standards. They also depend on historic home sales records to calculate the estimate.
Neither of these services produce official appraisals. They also don't factor in market nuances or other issues a certified appraiser or real estate professional might in assessing the value of your home.
Will a neighbor problem reduce the value of my property?
While it may not reduce the actual value, a cluttered landscape next door can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall.
A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long.
It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas. In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department.
Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.
Resources: "Neighbor Law: Fences, Trees, Boundaries and Noise," Cora Jordan, Nolo Press, Berkeley, Calif.; 1991.