Know the value of your home: Why and How
I am not planning on selling my home, so why is it important to know the value of it?
taxes
net worth
future plans
There are many other reasons to know how much your home is worth other than when you decide to sell it. I will discuss the three above.
Taxes
How does knowing the value of my home affect taxes?
When you get your notification of the assessed value of your home and you feel that it is not accurate (meaning too high) then you can dispute it and not owe as much on property taxes if you are correct. If they are coming in higher than you feel your homes value is, then that means you are getting paying too much in taxes. Home valuations typically come in lower but be aware of your homes value for that reason.
Net Worth
Whenever you get a loan for something through a bank, they will look at your net worth (which is determine by taking your assets minus your debt) and your debt to income ratio (how much debt you have compared to how much income you make). Knowing those two things determines how much they are willing to lend you. So if you know your net worth, you have a better idea of what a bank would be willing to lend you and it will help you in knowing if your financial health.
Future Plans
Knowing your equity (to know what equity is, click here) helps you know how much you can put down on a future home or how much to take out in a reverse equity loan. If you know those things then you can make your plans accordingly.
Knowing the value of your home, your most important asset, is important information that helps you calculate your net worth. It can also lead to many other decisions in your life.
Determine the Market Value
So now what? How do you determine the value of your home? Let me teach you what I do on a daily as I evaluate the Real Estate Market and help people in deciding their homes sale's price. It's a skill that requires data to back the decision.
The most common way market value of a home is determined is by how much people are willing to spend on a home. The way to see how much consumers are spending on that type of home is predicted by looking at recent homes that have sold and how much for. This requires sales data, knowledge of the Real Estate market, and knowledge of the home. You then find comparable properties.
When you are a member of the Multiple Listing Service you are provided with property sales data of homes that have been sold on that service. With that data you can determine a value. You have to be a licensed real estate professional to get that data. Here is a way you can get rough numbers for your own home. You can look on any of the active listing to help you in determining the value. The rough part of that is just because a home is listed for a certain price doesn't mean it will sell for that price. So if you're relying heavily on a house to justify the value of your home and that house sells for quite a bit less than all of a sudden the value of your home drops from what you were thinking. It is best to use sold home data.
But if you are determining the value on your own you can take the active data to give you a (very rough) number for the price of your home. Pull this from any of the online sources for which you can shop for homes. (Zillow, Realtor, and UtahRealEstate) Now you know where you are going to get your data.
So now you need to scavenge that data for properties that are the most similar to yours. It needs details that are "comparable". Make sure square footage is close, make sure that it has a similar amount of bedrooms, make sure its close in age, make sure the lot size is comparable, make sure it is made of similar material, try and get a similar floor plan and house style, have comparable amenities on the property. You want to have at least three good comparable properties. The more you have the more accurate you can try and push your price.
Now you need to take those properties and compare them side by side to your home and adjust price accordingly. You assign a certain price for what a bedroom is valued at, what a fireplace is valued at, how much an acre is valued at, etc. Once you've put a value on all those details and compared them side by side. You take how it adjusted your home value do that with all the comparable and average out what that home price would be. Sounds complicated but the hardest part is just determining the value of the details you're comparing. Once you have that it isn't too difficult to then compare all the properties.
Now you'll have price for the value of your home. If you don't want to do that yourself or you want a more accurate value, hire a professional. It's what they do for a living! Real Estate Agents do it for free (they're trying to earn your business for when you sell) You can also hire an appraiser, but that one will cost you. ( at this moment when they are around $400).
Now you know a basic way of determining your homes value. If you don't want to do that work yourself, contact me and I would love to help. Want more market information or real estate ideas, check out my newsletter.
Thanks for reading!