How to Determine Your Home's Value
Updated: Aug 17, 2020
Ever wonder what your home is worth on the market but don't feel like calling a Realtor or waiting for someone to get back to you?
While I always suggest giving your friendly neighborhood Realtor a shout, today I will give you a brief rundown of how you can get in the ballpark of your home's value to figure out roughly where you stand and if you feel it is worth pursuing listing it.
Determining Neighborhood to Search
The first step in determining your own home's value is going to be narrowing down where to search for properties to compare it to. I always recommend staying within your own neighborhood if possible, and if there are different phases of development within your neighborhood, narrowing it down to those built around the same time as yours.
Using your entire city, subdivision, or zip code are just a few ways to drastically skew your home's value and either leave you with unrealistic expectations or feeling like the rug has been pulled out from underneath you. The closer to home the better.
How Far Back in Time to Look for Comparable Sales
Looking back within the area that you choose to search for comparable properties, it is important to realize that "recent" in regards to sold properties is relative and could be different depending on where you live and how active the market is.
For example, in Lubbock where I live and work as a Realtor, I like to look for properties sold no more than 6 months ago that I can use for comps. In some neighborhoods that are hotter, this number could be as low as 2 months or less, whereas some neighborhoods that are older and have less turnover, that number could be as high as a year that I am able to work with.
As a general rule of thumb, it is best practice to gather a minimum of 3 properties to use as comparables, but somewhere between 5-10 is ideal and most representative of what your property can be valued at.
Once you find the right area and are able to narrow in on homes sold within the last 6 months or so, it is time to dig in deeper and determine which ones to use in your analysis.
For sake of example, let's say that you live in a 3 bedroom, 2 bathroom, 2 car garage property built-in 2006.
When looking through the recent sales in your selected area, you will want to focus in on as many properties as possible that share those 3 main features with yours. If at all possible, avoid any properties with more or less bedrooms and bathrooms. Year built is not too big of a concern, but if the difference is more than 3-5 years, then you tend to start seeing a material difference in building style that equates to a difference in value.
Adjusting Comparable Property Values
Once you have picked out 5-10 recently sold comparable properties in your neighborhood, it is time to begin comparing them to your home. What we will be doing in this next step may sound counter-intuitive at first, but hear me out, and let's work through this together.
We will be looking at each property individually, and noting the adjustment in price that is accounted for based on the differences in the property. We will be taking those adjustments at the end to determine the final value of your home.
Things such as an extra bedroom add additional value to a home, so we would look at 4 bedroom homes and see what they sell for on average compared to a nearly identical 3 bedroom home. We would then subtract the difference from the 4 bedroom home in our comparable property selection to adjust it closer to our subject property.
On the flip side, if we have a recently sold property we are using as a comparable and it is NOT as nice as your home, we will go ahead and figure out what the cost difference would be to get it up to the quality and condition of your home.
We will do this for each property in the list of comparable, and note the adjustments made (both up and down) on each one. Once we have completed this, we will calculate the net adjustments necessary to the comparable properties, and either add or subtract this to the average of all of these properties to come up with an estimate of our properties value.
So if the average of these recently sold prices is $150,000 and the adjustments necessary to get the comps to a similar condition as our property comes out to $2,537, we would be able to deduce that our property comps out at $152,537.
If you are happy with that number, I would call your favorite Lubbock Realtor and have them set up a time to come see your home in person and run a more detailed sales comparison analysis to see if that number is accurate, and if it could be even higher!
If you are not happy with the number, I suggest calling your local Realtor to get a second opinion, and see what could be done to increase your home's value as quickly as possible. For a brief guide on increasing home value, check out some of my other blog posts on my website or YouTube videos I have posted on value-adding improvements.
There are plenty of things you can do to increase the value of your home, and don't let the initial "comp analysis" get you down in the dumps, or conversely, get you too excited. Ultimately, your home's value is determined on the market and by what buyers are willing to pay for it. What you may see as sentimental value does not come into play when buyers walk through your house. They are the most critical eyes, and always notice the small defects and imperfections before noticing the thousands of dollars in upgrades, repairs, and improvements that have been made.
Think about what event is triggering your thoughts on moving or selling your home, and what you are looking to get for your home. Do your best to separate yourself from that number when analyzing your home, and be as objective as possible.
What you don't want to do is analyze it from the perspective of someone who thinks it is better than the consumer does, as you will only be disappointed when it won't sell for as much as you want or need it to. This is a distinct advantage of having a Realtor analyze it for you.
Most if not all Realtors can run comps on your home and walk you through the process in under 30 minutes at no cost at all other than the time out of their day, so don't hesitate to have them send you your updated home value any time you are curious.
I have several clients that love seeing how their home value fluctuates month-to-month, and that is something I am more than happy to do for you as well if you are curious how the market is directly impacting your home's value.
As always, feel free to connect with me across social media and reach out with any questions you have! Whether you are thinking about getting into real estate investing, buying your first home, or selling your 10th home to find your dream retirement home, I am here to help you with any and all of your real estate needs!