If you’re planning to sell or refinance your house, it’s crucial to know its current market value. For that, a home appraisal is necessary. You may have asked, “Why can’t I appraise my own house?” Well, you can conduct your own home appraisal to get a good feel for what it would bring when you put it on the market. However, you can’t perform your own appraisal for the lender, who needs this information when considering a buyer’s mortgage application for the property or when considering your refinancing. A mortgage lender will require a professional appraisal, but your own home appraisal can give you a ballpark figure. Keep in mind that home appraisal is as much an art as it is a science. Relatively few homes sell for their exact original market list price.
Realtor.com Home Value
You can conduct a basic appraisal simply by typing your home’s information into a real estate website such as that offered by Realtor.com, Zillow, Redfin and other major online real estate companies. On these sites, you may only need to enter your address, and your home’s estimated value appears immediately. The information is based on your basic home data, such as square footage and recent sales in the area. When it comes to accuracy, the more sales that took place in your locale within the previous three months, the better. If only a few homes sold in that period, and they were all quite different in size and type, you aren’t going to receive data as accurate as when a larger number of homes had a closing.
You may also find that different sites give you a wide range of values based on the same information. U.S. News & World Report uses an example of a three-bedroom Miami, Florida home, which various sites estimated would sell for between $246,000 and $444,000. That’s a nearly $200,000 difference on the same house, so it is obvious that different real estate sites use their own proprietary algorithms based on disparate criteria.
While these online realty sites are a good starting point, what they cannot do is take into consideration the condition of your home. A house in excellent condition is worth more than a property that has been neglected and needs considerable work.
Lose the Emotion
One drawback to appraising your own property is the emotional investment you may have in the home, which could color your valuation. You must look at your property in a completely disinterested way when conducting a home appraisal. That’s hard when you know a house so intimately, and you’re in danger of disregarding a familiar flaw that a stranger will notice immediately.
If you’ve done renovations on your home, keep in mind that you aren’t going to get 100 percent of the money back on these improvements. That means that if you spent $100,000 adding on another bedroom and bath, value is added to your house, but you can’t just tack that amount onto the price. There’s also the danger of having the most renovated home in the neighborhood. Perhaps you love your house and made it the biggest, most attractive property in a neighborhood of smaller homes. While your house is worth more than its smaller neighbors, it’s not comparable to a nearby neighborhood in which all the homes are larger.
Finding the Comps
Real estate agents evaluate a market price for a new listing by checking comparable recent sales in the area, and you can do the same. However, your work is a little harder, unless you have access to the Multiple Listing Service. You can, however, use the same real estate sites offering instant home appraisals to find out how much recent homes in your area sold for, and you can compare the houses to your property. The sites include filters such as number of bedrooms and baths as well as school scores, crime statistics and other factors making a difference in value. Do not use for sale listings as comps because you don’t know what the house will sell for or if it will sell at all. Choose comps with photos so you can compare house styles, landscaping, interior conditions and other pertinent information. For best results, look for comps in your school district, as the quality of a school system has a great effect on house prices.
Remember the real estate mantra: location, location, location. Make sure you are comparing truly comparable properties. For example, you own a four-bedroom, 2.5 bath house built in the 1980s on a one-acre lot. You find a similar home that just sold last month, so does that mean the two are true comps? Maybe, but if one house is nestled in a quiet cul-de-sac and the other is located on a busy highway, the location will change valuation. For residential purposes, the cul-de-sac house will likely command a higher price, but that may not prove true if the house on the highway is in an area permitting commercial use. When searching for comps, you must ensure you are comparing apples to apples so to speak, so always look at your local zoning map.
Finding a comp is relatively easy when you are comparing similar homes. When your home is truly unique, locating a comp is more difficult. Perhaps most of your town consists of homes built in the past quarter-century, but you live in a Victorian dating from the 1890s. In such situations, you may have to settle for a value range rather than a true estimate.
The Square Footage Myth
You may have heard that the best way to determine your home’s value is via square footage. People may think their house is worth a certain amount because they know the average amount per square foot for which houses similar to theirs in the area have sold. While square footage has a place in determining a home’s worth, it’s just one variable. There’s more to a house than its size, and square footage doesn’t take a lot of elements into account.
For example, you may live in a development in which all of the homes are pretty much alike. You may even figure that your home is worth what the house across the street sold for recently. However, if your neighbor’s house had extensive interior or exterior renovations and yours did not, that affects value even if the square footage is identical. If the nearby house had a new kitchen installed two years prior to the sale, and your kitchen is 25 years old, it’s unlikely that your house will sell for the same amount of money.
Neighboring Homes on the Market
What happens when a neighboring home similar to yours is on the market, and its value is less than what you think your home is worth? The answer may lie indoors, so if there is an interior video available of the home, study it. It’s one thing if your house has an updated kitchen and baths and the other one doesn’t, but if the interiors look much the same, you’ll have a hard time putting your house on the market for a higher price. There are exceptions, however, as some people may price a house lower for a quick sale. This is often the case in an estate sale or a house sale due to divorce.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.