Good question. And one that can’t truly be answered by any blog, article, or online calculator. Your home’s real worth isn’t a solid, predetermined monetary figure – it’s the amount someone is willing to pay for it. However, if we ask the right questions and utilize the proper resources, we can get as close as possible to the proper amount that your home will list for. It can be an excellent starting point as you begin the process of selling your home.
Take this quiz to see how much you know about determining your home’s worth:
1. Which one of these numbers will provide your home’s exact worth?
a. value of your neighbor’s home
b. amount for which you originally purchased the home
c. homeowners insurance
d. property tax assessment
e. none of the above
Answer: e. none of the above. Your home’s exact worth is indeterminate. Like stated above, your home’s true value is simply what a buyer will pay for it. But some of these numbers can come close to a fair estimate. Your neighbor’s home, while it could be very similar, will almost never be identical to yours. Even with identical construction, many people adjust the interior and exterior over the years to suit their individual tastes, from new flooring and countertops to decks and pavers. The amount we purchased our home for rarely applies. We all want our home to make us money in the long run, but the overall economy and housing markets can change at any time. Buying a home is a risk, and regardless of what you paid for it, the value will inevitably move up or down. Homeowner’s insurance value only takes into account the home and not the property. The property tax assessment is a decent indicator of value, however, it is determined annually. So, throughout the year the assessment can dip below or above current market value.
One of the only ways to get a true assessment is through an appraisal from a licensed professional.
2. Who should appraise the home to determine its worth?
a. the seller (you)
b. the buyer
c. the lender
d. all of them
e. none of them
Answer: d. all of them. It is in everyone’s best interest to get their own appraisals. While everyone is most likely acting ethically, the fact remains that this is still a business transaction. Everyone is trying to get the best deal for them. The lender will recommend an appraiser to the buyer – an appraiser who may be little bank-friendly. While appraisers should always be objective, they are human, and can possibly be influenced by lenders. When that same coin is flipped, realtors and homeowners can also influence an appraisal by providing key information about renovations, additions, and the neighborhood. In the end, don’t take the word of a lender or buyer’s appraisal. Get your own to ensure you list your home at the right price for the market – a number you sought out for yourself in your own best interest.
3. How do “comps” help an appraiser determine home value?
a. they provide details on the three homes nearest to yours
b. they provide information on how much homes were originally purchased for
c. they provide the amount for which comparable homes in your neighborhood are listed or have recently sold for.
d. all of these
e. none of these
Answer: c. they provide the amount for which comparable homes in your neighborhood are listed or have sold recently for. Appraisers will look at three comps, which they can obtain from the Multiple Listing Service (MLS). The three comps will have information on homes that have recently been listed or sold in your area – homes with specs the same as yours. Once they have a baseline amount, they can adjust for swimming pools, square footage differences, etc. The three homes nearest to yours may be quite different than it, and the amount homes were originally purchased for have almost zero bearing on what a home will sell for in the future.
After appraisals, it is up to the buyer to ultimately decide what they are willing to pay for your home.
4. Which of the following can actually lower the value of a home to a buyer?
a. backyard sheds
c. textured ceilings
d. rich-colored walls
e. all of them
Answer: e. all of them. Remember, your home is worth what a buyer believes it is, and some minor details to you, could have them seeing financial red flags. A backyard shed, especially one in disrepair is not only an eyesore, but can have a potential buyer seeing removal and sodding costs. Overgrown landscaping with various types of shrubbery can have a potential buyer seeing removal or professional landscaping services added to their monthly bills. Textured ceilings, like popcorn ceilings, are difficult to repair or paint over. Plus, they may be seen as covering up a flaw in the ceiling. Dark wall paint is expensive to paint over, requiring many more coats than lighter colors.
5. Which of the following can boost your home’s value to a buyer?
a. removing walls
c. additional lighting
d. removing carpet
e. all of the above
Answer: e all of them. Buyers today desire open floorplans, so removing a non-structural wall to open up the living room, kitchen, and dining room area will definitely make the home more desirable and valuable to a buyer. Clean grass, trees and shrubs can improve your home’s curb appeal, which is the buyer’s initial interaction with your home. If a buyer doesn’t feel like they are going to need to spend a fortune to fix up the yard, your home will be more valuable. Dark homes will not be worth as much as those that let light in. If your home is dark, consider adding sky lights, tubes lights, or any lighting in addition to existing lights that will make the interior more bright and appealing. More and more homeowners are moving away from carpeting. If your home has hardwood floors underneath your carpet, removing it and refurbishing the wood underneath can add considerable value to your home.