Everyone wants to know “how much is my home worth?”. Everyone also thinks that they know “how much their home is worth”. But when it comes to selling a home, it is better to look from the buyer’s point of view and ask the question “how much would I pay to buy that home?”.
Home values are very important. They play a very key factor in obtaining home equity lines of credit. When home values are high, they can lead to a consumer spending more discretionary income (for example, when you think you have made an extra $100,000 on your house, you tend to spend more.) So high home values actually help the economy. The reverse can also be true as we are seeing in the USA. In America, many home owners are underwater (in a negative equity position: mortgages larger than the home is worth). This has led to the American consumer choosing to save more money and spend less.
The important qualities of home values are that they are not static, or guaranteed. They can change from month to month and they can change very quickly. They are also not guaranteed, in that, just because someone paid $400,000 for the home up the street, does not necessarily mean that another buyer will pay $400,000 for your home. Each home is unique and each buyer is unique. However, most people will say that their home is worth “X” because a home down the street sold for “X”. Most people will have an inflated value of their home’s worth. The dangerous aspect of an inflated value is when home owners withdraw equity from their homes based on this inflated worth. It’s only when they need to sell, that they realize their home is worth $50,000 less than they thought, plus they need to pay another $20,000 in realtor fees when they sell.
How to know the real value of my home?
The real value of your home will only be known when you actually sell your home. Before that, you can only estimate the value of your home.
If you are considering re-financing your home, the bank will usually perform an appraisal. We have found that the value that a bank put’s on the home for re-financing tends to be high. In one instance, a home was listed for sale for $520K and did not sell. After not selling, the owner refinanced and the bank appraised the value at $570K. How can a home that could not sell at $520K, be worth $570K? So even if a bank tells you your home is worth “X”, it does not mean that your home is worth “X”.
Real Estate Fair Market Analysis:
Nearly all real estate agents will offer “Free Market Analysis” to consumers. This tag line “Free Market Analysis” is used in many real estate agent advertising (bus benches, newspaper ads, billboards). Real estate agents use this offer to “get their foot in the door”. They want to meet as many people as possible in hopes of landing a new client.
A real estate agent’s “Free fair market analysis” comprises of printing comparable listings in order to come to an approximate value. There is a significant “room for error” in all Free Fair Market Analyisis completed by real estate agents who are trying to gain you as a customer. There is a high probability that the “analysis” will be bias. For example, if you had 3 real estate agents providing you with an analysis in hopes of getting your listings, most likely they would show you “selective” comparables with high selling prices. Potential sellers tend to use the real estate agent whom they think will get them the most money when they sell. “But wouldn’t the agent just be waisting their time by over pricing the home?” Of course they would, but what typically happens is that the seller’s get fed up, reduces their price and sells. Experienced agents know that this is just a part of the real estate business.
Do your own “Comparative Market Analysis”.
This is the best suggestion for knowing what your home is worth. First find the sold prices by calling a real estate agent. Tell them that you want all the recent sold prices from your neighbourhood. After you
obtain the sold prices, you can make your own mathematical and rational decisions. If there is an exactly similar home sold, in the same neighbourhood, then it will be easy to determine your value. If there is a slightly similar home, then add or subtract the differences. You can find the price of an upgraded bathroom kitchen or floors at Renova.ca. For example if the home that sold has a new kitchen, then you would subtract the price of a new kitchen from the sold price.
Always compare apples to apples. You should always take important factors into consideration when finding the value of real estate. Backing onto railway tracks will reduce value. Fronting on a major street will reduce the value. Living next to a gas station will reduce the value. So make sure that the home you are comparing your home to has similar interior and exterior features.
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