The Differences In Home Valuation Methods And Results Can Be Surprising
Curious about your home's current market value? You're not alone. But how do you know if the valuation you are given is realistic? To know, you must first consider the source.
The Four Sources Of Home Valuations
Home valuation services can typically be categorized into one of four groups - - or as we here at The Art of Real Estate Team have dubbed them, the Four "A"s of Home Valuation:
Let's start with Automated valuations. Think Zillow or some other data-driven 'calculator' of home values. These are the least accurate and least dependable sources simply because they use very broad-based information to try to evaluate a specific property. Being automated, they are limited to only the most high level overview of data and cannot give even simple consideration for a home's level of updating, decor, scenic views, proximity of nearby amenities - - or in other words, they do not account for the majority of factors that actual Home Buyers value.
Nonetheless, if you are looking for a quick, general range of what your home's present value might be, there are some automated services which are far superior to others as they include actual "comps" with their valuation so that you can see more than just the automated outcome. Here's an example (Click here)
Next, let's consider Assessed values. Like Automated valuations, your home's Assessed value is calculated from a large pool of home data (such as your Zip code) in order to assign a value to your specific property. The purpose of assessments, however, is unique in that they are used by local and/or state governments for the purpose of determining a home's value for taxation. Your home's real estate taxes are the result of your assessed value being calculated against the jurisdiction's known tax rate. The issue of accuracy remains in that typically these values are arrived at without a property assessor actually visiting your home or property.
A much more accurate indicator of value is a professional property Appraisal. This is because unlike Automated or Assessed valuations, your Appraisal is an analysis of your home against the most recently sold and settled homes that are the most similar to yours. An Appraisal requires that the professional appraiser actually visit your home, take measurements, and confirm the level of updating or condition. Any 'big ticket' improvements will add to the home's value and any potential negatives that may detract from value will also be considered.
The resulting valuation should begin as an 'apples to oranges' comparison of the top 3 most similar homes to your home (the 'Subject Property') and, once appropriate dollar adjustments are made up or down for items of value, the resulting numbers should reflect an "apples to apples" end result. Common adjustments are made for differences in square footage, features such as fireplaces or the number of garage spaces, and major renovations or upgrades. One limiting factor for appraisers is that they are usually limited to considering only sold (settled) properties which means that any actively For Sale homes or even homes that are Under Contract are not part of the final valuation. In a changing market, this can lead to home appraisals not keeping pace with a rising (or falling) marketplace.
But Beware! The reason that a home appraisal is done can vary, and therefore so can the results in relation to a true current market value. Appraisals are often done in cases of divorce or a court-ordered sale where the home was not placed on the market For Sale. The same is true for an appraisal done by your bank in order to refinance your loan or provide you with a Home Equity Line Of Credit ("HELOC"). Again, no Buyer was involved, just a lending institution, so it does not reflect what a Buyer was willing to pay for the home.
Only a Real Estate professional can provide the most meaningful and comprehensive home valuation: A Comparative Market Analysis, also known as a CMA. Why is this? Well, to begin, like a professional property appraiser, an Agent will visit your home and review its condition, updating, unique features, and all of the potential 'pros' and 'cons' in great detail.
Additionally, an experienced Agent may well have been inside one or more of the most similar homes to yours while they were on the market, so the depth of knowledge about why they got the price they did can be invaluable. Also, real estate Agents take into consideration factors that appraisers cannot, such as market trends that may suggest a rise in home values in the near-term, or the effect of different school districts on what Buyers are willing to pay for homes.
The bottom line is that an experienced local Agent will always be the best resource in determining your home's value, but not all Agents are created equal! Insist on knowing not just how many homes in the area that the Agent has sold, but how well they priced them initially versus what they subsequently sold for. Only then will you know the you're working with a real pro!
We at The Art of Real Estate Team pride ourselves on not just selling more homes, but actually selling homes for more! Check out our stats on our website! And, remember:
"We Sell Homes From A Fresh Perspective...YOURS!"