Most home owners have some idea of their home's value. Sometimes it's accurate, but sometimes it's not. The value of a home is determined by numerous factors. The real estate tips outlined in this article explain the most important tools you have to research your home's value.
And even if you're not getting ready to sell your home, this research can help you set your budget for remodeling projects. You can't assume that the cost of a kitchen remodel, or any other improvement, will automatically increases your home's value by that amount. And a similar, neighboring house that sold for a certain amount doesn't mean your home is worth the same.
The only way to narrow down the true value of your home is with a little legwork and patience. Once you have a handle on which factors matter, and which ones don't, you'll gain a clearer understanding of what your home is really worth.
So let's clear away some of the mystery and show you how much your home might really be worth:
Real Estate Tips: Examine the Tax Appraisal
In most areas, you pay property tax on your home every year. You might write a check to the county clerk, or your taxes may be included with your mortgage payment. However they are paid, it's a pretty safe bet that your local government claims their taxes regularly. The amount you pay is determined by the tax appraisal.
This appraisal is not like the appraisal you got when you purchased the house. That is a financing appraisal, and it is significantly more thorough. It covers many factors to help the lender determine whether the property's value supports the amount of the loan.
With a tax appraisal, your property is assessed based on factors such as the size of the lot, square footage of the structure, and the condition of all improvements on the land. Improvements include the house itself, a garage, storage sheds, and even landscaping.
Examining your tax appraisal gives you a rough idea of your home's value. The dollar amount should be clearly listed on the card or form, because this is the amount the assessor uses to calculate how much tax you owe. If you do not have a recent tax appraisal, you can usually get a copy for free or at a nominal cost from the assessor or county clerk's office. In some areas, this information is available for viewing online.
If your home were placed on the market, it may fetch much more than the tax card estimates. On the other hand, it may fetch much less and wouldn't you rather know this before making important decisions?
Real Estate Tips: Check the “Comps”
The term “comps” is short for comparisons. When you check the comps in your neighborhood, what you're looking for are comparable properties that have sold in your area over the past 6 months. For a comp to be a true comparison, the square footage, lot size, and even the age of the home should be similar. Where there are differences, you'll compensate by adding or subtracting for them, explains Bigger Pockets Real Estate Resources.
For example, if your home is similar in age, condition, and square footage as another, but yours has a larger lot, yours is likely worth more. You'd need to determine the average incremental value of land in your area, determine how much larger your lot is than the comp, and increase the value of yours accordingly.
The tough part with comps is finding them. Real estate sales are public record, so you can access them through a local government office. These offices will have shelves and rows of binders that contain documents, with an index to help you find the information you need.
This is very time consuming, though. An easier, although more expensive method, is to ask a Realtor to do this for you. Real estate agents have access to a database called the Multiple Listing Service, or MLS. Instead of days spent in a records room examining microfilm and over-size binders, a Realtor can find comps in a matter of minutes.
Researching your home's value can give you a lot of insight. You'll have a better idea of whether your home owner's insurance is adequate. You'll also learn more about whether a fabulous new kitchen will really improve the market value of the property, or if a swimming pool is worth the investment.
There are many reasons why home owners want to know what their property is worth. If you only want to satisfy your curiosity, the tax appraisal value may be all the information you need. If you're considering selling the house, a more in-depth search for comps is in order.
If accuracy is critical, such as when negotiating a sale, then you'll want to hand this job over to a professional appraiser. An appraiser will use numerous methods to calculate the most accurate fair market value estimation available.
Have you researched the value of your home recently? We'd love to hear other real estate tips you have for estimating your home's value.