The scary question these days to most homeowners is “What is my home worth?”
Here is some good news on the housing front: The Market Activity is beginning to increase!
Market trends in the Bay Area are beginning to show an increase in purchase offers and less days on market.
The bad news is that even appraisers and real estate agents are having a harder time discerning a home’s worth. The old rule of thumb, that houses appreciated 3 to 5 percent annually, no longer applies, although there are areas where home values have remained stable.
You can not rely on national and even regional statistics. There are certain pockets of neighborhoods that are holding their own. Even in a given neighborhood, you can have different markets on the same street. The bottom line is you don’t know.
But with some computer research and a little legwork, homeowners can get an idea of their home’s value.
Traditionally, real estate appraisers start the process of valuing a home by looking at sales price data for comparable homes, called comps, over the past six to 12 months. But in the current market, that has become an apples-to-oranges comparison because a year ago the market looked much different.
The problem with looking at just six months of data is there might not be many comps to look at so more professionals also are looking at active listings to see how similar homes are being priced. But use caution! While this is a starting point, the house hasn’t sold yet so the market hasn’t validated the price. And if an active listing isn’t generating much interest from potential buyers, it means similar houses in the neighborhood are worth less than that listing price.
The Internet is a good place for home owners to start the research, both for information on recent sales data as well as estimated home values. While some sites offer sales data, other use complex algorithms and closing sales prices to gauge the home value of individual properties. Appraisers acknowledge that they check the various sites but caution homeowners against putting too much weight into the numbers. The value range can fluctuate dramatically, sometimes by as much as $100,000, and can be inaccurate.
Sites that offer home values consider the square footage but not necessarily the number of bedrooms and bathrooms, which can impact worth. They don’t consider factors like curb appeal, whether a kitchen has been remodeled, or the quality of materials used in the remodeling.
Appraisers have found online appraisal tools less accurate in more established neighborhoods where there is a wide range of housing types and ages. Where they work best, appraisers say, is in cookie-cutter subdivisions.
The online values of condominiums within the same or similar buildings are sometimes more reliable, but the hitch is that one unit’s value is directly tied to a neighbor’s eagerness to sell his own unit.
I personally like to look at market absorption to help determine a home’s value. For instance, if 12 properties sold in the past six months, that means two properties sold every month; I also compute the average sales price. If there are 30 active listings, it’ll take 15 months to sell them. If a homeowner wants to sell a property quicker than that, usually their agent will set a lower-than-average price on the home.
Given the number of listings on the market – more than 60,000 in the Bay Area – experts also advise homeowners to act like a buyer in their own neighborhood to help figure their own home’s worth.
Check out the homes for sale in that area with similar characteristics, and either visit the open houses or take the virtual tours of listed homes offered by real estate agency web sites. Talk with real estate agents at open houses, to try and get a sense of how much interest a house is generating at a certain price
Square footage, a key factor in online avm calculations, is important, but a homeowner needs more information for a true comparison. The home should have the same number of floors and a similar number of bedrooms and bathrooms.
Location plays a bigger role than it did in real estate’s headier days. When the market was balanced or undersupplied, the fact that a house was on a busy street, had no back-yard privacy, backed up to a gas station, or sat in the shadow of a water tower, mattered little. In the current oversupplied market, any of those negatives could knock up to 5 percent off the value of a $500,000 house.
Pay attention to amenities, too. A three-car garage in an urban area has a higher perceived value than a three-car garage in a suburb neighborhood. The same goes for granite countertops and travertine flooring.
Another factor to consider is the existence of new construction nearby and the competitive forces at play. If a builder is offering $75,000 in incentives on a new home, and no mortgage payments for 6 months, the value of an existing, similar home in the neighborhood just plummeted.
The value of the house would go down by more than the value of the concessions because your house is used. A new house is kind of like a new car, it’s got that new car smell.
More consumer information can be found on our website http://www.msrvalue.com
Or to order an appraisal just click on http://www.msrvalue.com/Orderanappraisal
–Sasha Markham
