Determining The True Value Of Your Home

Pop quiz: What best determines the true value of your home?

a) A potential buyer for your home

b) The internet

c) A formal appraisal.

Of course, it’s a trick question. If you answered none of the above, you’re correct. Before we reveal the answer, let’s look at why potential buyers, the internet, and appraisals aren’t the best way to determine your home’s value.

Potential buyers. Although it’s somewhat true that your home is worth as much as someone will pay for it, that’s not a realistic determination of value. If your home is listed on the market for $350,000 and a potential buyer offers you $450,000 for it, does that mean your home is worth $450,000? It’s possible, but not likely. Potential buyers can determine the actual selling price of your home, but not necessarily the value of it.

The internet. Popular internet sites such as Zillow.com have allowed potential buyers the freedom to browse thousands of homes and see all sorts of information including estimates of a home’s value. However, if you compare the estimates for recently sold homes with what those homes actually sold for, the estimates aren’t correct; only 65 percent of homes listed on Zillow sold at a price within 10 percent of the estimate. The main reason for this discrepancy is that much of the data available for homes is either incomplete or incorrect.

Appraisals. Because an appraiser thoroughly analyzes all aspects of your home, an appraisal will give you a fairly realistic idea of how much your home is worth—much more so than the internet or potential buyers. However, despite the detailed and accurate nature of an appraisal, an appraiser relies mainly on past sales data. An appraiser determines a home’s value based on actual sales figures. Unfortunately, this method leaves out other considerations such as the list price of current homes for sale and current market trends.

Now back to our pop quiz. Who or what best determines the true value of your home? As you may have guessed by now, the answer is...your real estate agent. Agents have all of the experience, knowledge, skills, and tools to accurately assess your home’s value: Completive Market Analyses, knowledge of real estate trends past and future, current sales data, average time on the market, list price information, and more.

So, when you need to determine the true value of your home, the first—and only—call you’ll need to make is to your real estate agent.  ∆

Source of Zillow sales figures/percentages: CNN.com