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Are you wondering "how much is my house worth?"
I have two answers for you. First, if you don't really
need to move, it is worth whatever you say it is. If
you think, "I wouldn't sell this house for less
than $300,000," then it is worth that much to you.
If you need to sell it, though, what it is worth to
you is irrelevant.
Market value is the only relevant value once you are
ready to sell. This is the value according to all the
home buyers out there. They don't care what you spent
renovating the house, or what you originally paid. Spend
$50,000 adding a pool, and they may only pay $20,000
more for the home. Real estate is worth what the market
says it is worth.
How Much Is My House Worth - Part One
To estimate the market value of your home, use "comparables."
This is how appraisers do it. Find at least three similar
homes nearby that have sold within the last six or maybe
twelve months (these are your comparables). This information
is in county records (sometimes online now), or ask
a real estate agent with access to the multiple listing
service. Get the sales prices, terms of sale, description
of the property, and other information.
Take your first comparable, write down the selling
price, and review the description item by item. Add
to the sales price of the comparable for each thing
it doesn't have that your subject home has, and subtract
for each thing it has that your subject home does have.
This sounds confusing, but it will make sense once you
try it a couple times.
For example, if your home has a second bathroom, and
the comparable doesn't, add the value of the bathroom
to the sales price of the comparable. If the comparable
home has a blacktop driveway, and your's doesn't, take
the value away. You'll have to estimate what these things
are worth, or ask for professional help.
You are rectifying differences, to see what the comparable
home WOULD have sold for if it was just like yours.
If a comparable sold for $242,000, with one less bathroom
than your home, and a bathroom is worth $15,000 in your
area (ask a real estate agent for help with these figures),
then you ADD $15,000 for the bathroom it doesn't have.
Subtract, say $5,000, for the paved driveway it does
have, that your home doesn't have. $242,000 plus $15,000,
minus $5,000 gives you a comparable sales price of $252,000.
Do this with each comparable, then average the three
comparable prices. If, for example, the three comparables
now have adjusted sales prices of $252,000, $262,000,
and $249,000, add the three figures and divide by three.
The indicated value of your home is $254,300. This is
about what it should sell for.
How Much Is My House Worth - Part Two
Appraisal is an inexact science. If you can only find
houses sold over a year ago, you should probably estimate
appreciation in the area, and add that. If one sold
with seller financing, you have to adjust for how this
affected the price. These complications make it tough
to appraise your own home, so what if you need help?
There are other ways to find out what your house is
worth. You can pay for a professional appraisal. This
way you will also have something to show to prospective
buyers who doubt the value. Be sure to tell the appraiser
about anything she might miss, like a newer roof, or
specially imported tiles.
What about online services that tell you what your
house is worth? They don't have enough access to sold
prices of homes around the country to have a program
figure the value of your house. Instead, they usually
just take your basic information, e-mail address, and
phone number, and sell this "lead" to a real
estate agent that will contact you.
It is better to find a real estate agent on your own,
and ask "How much is my house worth?" Find
one who has sold homes in your area, and ask if she
can do a "market analysis" of your house value.
Normally this is free, with the agent hoping to impress
you and get your business. Often, if the agent has experience
and has worked in your neighborhood, they'll do a better
job than an appraiser, and the price is right.
Steve Gillman has invested in real estate for years.
To learn more, get a free real estate investing course,
and see a photo of a beautiful house he and his wife
bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
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