If you are selling, refinancing, or trying to reduce your taxes, you will need to know the true value of your house. Very seldom do homeowners get it right when they price their home at what they think it’s worth – this usually winds up in an overpriced home. The three main methods for valuation are fair market value, appraised value, and assessed value, but for sellers (and buyers), fair market value is really the only one that matters. Fair market value is what people are actually willing to pay for a home like yours in your area. To assist you in the process, we offer these 5 key tips to help you determine the true value of your Cape Cod house.
1. Use Valuation Tools Online
A good way to begin when trying to determine the value of your house on Cape Cod is by using one or more of the online valuation tools. “In fact, 22% of U.S. homeowners who determined their home’s value used an online estimator,” also known as an automated valuation model (AVM).
Typically offered by lenders or real estate sites, these tools use “public records like property transfers, deeds of ownership and tax assessments, along with some mathematical modeling.” They then “try to predict your home’s value [by incorporating] recent sales and listing prices in the area.”
You need to be aware, though, that there is a lot of variance among these (usually free) tools, and some AVMs are more accurate than others. In addition, most of AVMs are offered solely for the purpose of marketing and generating leads, which means the AVM providers will return a value for a property even when the data is too limited for an accurate valuation.
2. Get a Professional Appraisal
Another way you can determine the value of your house is by hiring a professional appraiser. Over a quarter of homeowners determine their home’s value by getting an appraisal.
An appraiser will give you a valuation based on your specific needs, for example, “the value for a date in the past [or] current market value for a refinance or purchase.” In any case, appraisers typcically evaluate the following to arrive at a final valuation report . . .
- Specific market – “The region, city, and neighborhood in which a home is located”
- Property attributes – “Characteristics of the house, including improvements and the land it sits on”
- Comparable properties in that market – “Sales, listings, vacancies, cost, depreciation and other factors for similar houses in the same market.
3. Use the FHFA Price Index Calculator
An alternative to using an AVM to help you determine the value of your house is the Federal Housing Financing Agency’s (FHFA) house price index (HPI) calculator. It uses a more scientific approach and so may help you arrive at a more accurate valuation.
Here’s how it works . . .
“The tool uses the ‘repeat sales method’ . . . Armed with millions of mortgage transactions gathered since the 1970s, the FHFA tracks a house’s change in value from one sale to the next. Then it uses this information to estimate how values fluctuate in a given market.”
You do need to be aware, though, that “the HPI calculator looks [only] at conforming home mortgages (loans less than $647,200 and up to $970,800 in high-cost areas). Also, it “isn’t adjusted seasonally or for inflation.”
4. Run the Comps
Now we come to perhaps the best way to determine the true fair market value of your house on Cape Cod. This valuation tool or method involves comparing your home against comparable homes in your neighborhood and immediate area that have recently sold. When you know what buyers are actually willing to pay for homes very similar to yours, you will get a better sense of the market value of your house.
To do this, you have to choose comps (comparable homes) that really are very similar to yours, ensuring that you take an apples-to-apples approach. “Think about which properties would interest a buyer if yours weren’t available. Look for similar size, location, condition, and upgrades.”
Here’s how to proceed . . .
- Browse a site where MLS listings are displayed to find the recent sale prices of comparable houses in your neighborhood.
- If there aren’t enough recent sales, look at listing prices of actively listed homes, but remember they might not be realistic.
- You’ll need at least three valid comps to come up with a likely range of market value for your house.
After finding valid comps, you will need to make adjustments to account for the differences between your home and the comparable homes you have selected. This could mean adding or subtracting value to the comp price if one house has more bedrooms than the other or if one of the interiors is outdated, for example. How much you add or subtract depends on conditions in your specific neighborhood, which can vary widely across Cape Cod.
5. Have an Agent Perform a CMA
The comparative market analysis (CMA) mentioned just above is indeed a great way to determine a fairly accurate value of your house. But it’s just not as easy as it seems on the face of it, especially when you need to make adjustments for differences or don’t have access to all the data you need. Your best bet is to have a local Cape Cod agent perform a CMA. Your local agent will know how to factor in the local-market peculiarities in order to arrive at an accurate valuation. When you need to determine the true value of your Cape Cod house, be sure to contact us today at (508) 314-6098.
