I hear it all the time, “my neighbor down the street is selling his house for $250k, and so mine must be worth the same.” Not quite. Maybe your neighbor’s house is outdated with 1970s style and you just updated yours. Even if both yours and your neighbor’s house is the same model on the same sized lot, yours is probably worth more since it’s updated. House finishings matter. Another scenario could be that your neighbor’s house is on an acre and yours is on a quarter acre. In this case, all else being equal, yours will be less valuable.
You “run comps” on the things you buy all the time and probably don’t realize it; it’s a very similar process with real estate. When shopping for a new or used car, you look at what others of a similar model have sold for in the area. Maybe you use a site like Craigslist to see what other people are asking for their car. Other items you may find yourself checking on may be clothes, tickets to shows, gas, milk, etc.… When shopping for a used bed frame, we recently looked at several ads to get a sense of how much sellers were asking for the same quality frame. Although it’s not accurate to base value on a seller’s asking price, it would be more accurate to know the actual price the item sold for. There is a great source for that info when it comes to real estate, the Multiple Listing Service (MLS!).
Market value is determined by many factors. Buyers and agents look at key indicators to determine a house’s value. They look at recent sales (past 90 days), never listings. I’m asking $50,000,000 for my house. Does that make all the houses in my area worth $50,000,000? I wish. An asking price on a listing is, by definition, too high because nobody has agreed to pay that much. Only compare the house you’re selling to houses that buyers have actually paid money for!
Next, if you have a three bedrooms, two bath house, compare the house you’re selling to others with a similar configuration of three bedrooms and two baths. Don’t compare it to the one house in your subdivision that has six bedrooms! Compare your house for sale to others with +/- 20% of your square footage. If you have 1,100 SqFt, a 2,500 SqFt house is NOT comparable. Compare your house to others close in age to yours. Just because a brand new house in the next subdivision sold for that much, doesn’t mean your 1978 built house will sell for the same.
Another one I hear a lot is that the average price per SqFt is $100 in my neighborhood therefore my 3,000 SqFt house is worth $300,000. It makes enough sense; but, when looking closer, one notices that all the other houses in the subdivision range in size between 1,600-2,100. The bigger the house and the further out of the normal range, the lower the cost per SqFt, so your 3,000 SqFt house may only be $85/SqFt! $255,000 is a big difference from $300,000!!
Normally, I try to get good comparable properties (comps) in the same subdivision. Sometimes this just isn’t possible because there aren’t enough recent sales. There are always irregularities like waterfront properties and their neighboring houses across the street. The houses across the street will never sell for as much as their neighbor’s that back up to the water. Sometimes the school zone a house is located within affects values differently for two otherwise seemingly identical properties. Of course the cost of needed repairs also affect house value when you sell your house.
Last but not least, on-line consumer sites are not accurate indicators of property value! They provide a good sense as to how much properties are worth in an area; but only true recent sales will tell the true story. On-line consumer sites are not working with up to date information like your local real estate agent is with the local MLS. Some only use county tax info; do you really want to trust the government to get your house value correct??
To get an accurate valuation on your property contact Zippy Home Buyer now for a free house evaluation to see how much you could sell your house for today.