For most, the home is your most valuable asset. And homeowners often have a preconceived notion of what their home is worth. There is no replacement for a professional calculation. Many real estate professionals are able to assist with calculating the market value of your home. This is accomplished through a Comparative Market Analysis (CMA). Still, it is helpful to understand the factors that real estate agents consider when calculating your home’s worth. This article answers the question, “”How do I know the value of my home”?
WHY KNOW THE VALUE OF YOUR HOME – REFINANCE
Many may also ask, “Why is this even important”? As a homeowner, it’s important to know the value of your home from time to time. Knowing your value will determine the EQUITY you have in your home. For example, if you bought a home 10 years ago for $300,000 and today it’s worth $500,000, then you have well over $200,000 equity/value in your home. It will be a higher figure since you have been paying down your mortgage loan over the past 10 years.
With this equity, homeowners are able to access refinance loans of usually 80% of your home’s equity. So if you have equity of $200,000, you could potentially refinance and receive about $160,000 in cash. This may come in handy as children start college or you are in a need or a home renovation. Note that most lenders require at least 20% equity in your home before qualifying for refinance.
WHY KNOW THE VALUE OF YOUR HOME – SALE
Another important reason to know the value of your home is if you decide to sell your home. Once you have a general idea of the current market value of your home, you will be able to work with your real estate agent. Your agent will determine the best price to sell your home for. Pricing your home above market value often leads to delays in selling and more negotiations. When this happens, price adjustments/reductions have to take place and this poses it’s own problems. Many buyers seeing price reductions conclude that something must be wrong with the home. This is a difficult (but not impossible) perception to change. Pricing your home well below market also poses other problems. Buyers view your asking price as the amount you want for your home and if there are no competing offers, this is as high as your home sale may go.
WHAT GOES INTO DETERMINING YOUR HOME’S CURRENT VALUE
The best way to answer the question “How do I know the value of my home” is through a real estate professional who will conduct a Comparative Market Analysis (CMA). Note that if you decide to refinance, your lender will conduct their own analysis using a licensed appraiser to conduct an appraisal of your property. A CMA is a tool used to estimate the value of a home by evaluating similar homes that have sold recently in the same area. An agent will look at many factors including: Location, Property Condition, Market Condition, Square Footage, Number of Beds/Baths, Improvements, Age of Home, and Amenities.
An important component of a CMA that a real estate professional is especially good at is factoring in the current real estate market. Depending on factors such as mortgage interest rates and housing inventory, agents are able to provide a customized CMA for your home. This is done by knowing how homes in your area are selling and for how much. Additionally, it is important to know how many days it takes for homes to go under contract. Agents gather this information from the Multiple Listing Service (MLS) and from other agents in the industry. They will look at homes sold, homes under contract, and expired sales. There is a lot of research that goes into an accurate CMA.
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DIFFERENCE BETWEEN A CMA, AN APPRAISAL, AND AN ASSESSMENT
A real estate specialist conducts the CMA. A lender hires a licensed appraiser to perform the appraisal and determine the value of your home for the purpose of a home sale. The appraiser ensures that the buyer of the home does not get more funding from the lender than the home is worth. An employee of the county or a contracted licensed appraiser conducts the assessment. This depends on the county in which you live. The purpose of an assessment is to determine the value of your property for taxation. In Virginia, assessments are conducted annually.
WHY NOT TO USE ONLINE SOURCES
There are several popular online home valuation tools available such as Zillow’s Zestimate and Realtor.com’s Estimator. While these can offer valuable insight when looking to buy or sell a home, determining the value of your home is not as simple as it sounds. Real estate professionals put a lot of time and effort in producing a useful and reliable CMA. For example, it’s hardly possible to conduct a thorough CMA without knowing each improvement. One must also look at the condition of the property and home. This is best left to an agent as it’s difficult for homeowners to be unbiased in the assessment of their home’s worth.
HOW TO REQUEST A CMA
If you have a real estate agent or have worked with one in the past, you can contact them and request a CMA. At Home Estate Realty, we produce monthly CMA’s for all our past clients. If you’re not working with an agent, a great place to start is HERE. We provide this service FREE of COST to anyone interested with no obligation.
BOTTOM LINE
Many people wonder “How do I know the value of my home”. The easiest way to determine the current value of your home is to work with your trusted real estate specialist to determine the value of your home. Thankfully, Northern Virginia remains a great place to own a home.
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