So often, I find that people will randomly ask me "So how much do you think that house is worth?" Like they literally point at a home that neither of us have been inside and expect me to have the magic answer.
I get it, they are trying to start a real estate conversation, and I can certainly appreciate that. But what people need to know is figuring out the value of a home is not such a simple task, despite what Zillow may think!
To make this difficult discussion easy, let's start with what a home is not worth.
A home is likely not worth.
- The current tax assessment
- A friend's opinion
- The appraised value from when it was purchased
- The appraised value from a refi/home equity loan
- What a neighbor's house down the street sold for
- What Zillow says the "Zestimate" is
Let's break these down.
Current tax assessment: When was the last time your municipality walked through your home? My guess is they never have since you lived in the home. So if the city you live in has no idea what your interior looks like how can they determine the "current value" of someones property? Answer: They can't!
A friend's opinion: Your friend loves you, doesn't want to give you bad news and probably isn't a REALTOR. Therefore I just don't find your friend to be a credible source to determine the value of a persons most expensive asset.
The appraisal from when the home was purchased: Unless you bought your home last week, the appraisal from when you purchased has old, outdated data. The number on that appraisal report is a snapshot in time of what your home value was on the day that appraisal was done. That day has passed, the market has changed; likely that value and condition of your home has changed as well.
The appraisal from a refi/home equity loan: My husband and I just got a Home Equity loan a few months ago. We purchased our home 3 years ago and haven't done anything major to it, neither did the prior owners who built the home in 1952 (pause and think about that one for a second). Somehow, over the phone, I got the appraiser to appraise our home for 42% more than we purchased our home for just 3 years ago. That's called being a REALTOR and knowing your numbers! Not to mention, he didn't step inside my home.
The neighbor's house down the street: Unless the homes are 100% identical and you are selling them on the same exact day, two homes on the same street will not hold the same value at different times.
The dreaded "Zestimate": I have had to battle this one too many times already in my career. A Zestimate is an algorithm created by Zillow, and that is all. Unless you invited Zillow in to your home to do a walkthrough, and Zillow is knowledgeable about your neighborhood that Zestimate is nothing but a dart thrown at a wall.
So where does this leave us? Who does determine the value of a home?
The most generic and best answer is drum roll please.
What a buyer is willing to pay!
How do we know what a buyer is willing to pay? Who would know what buyers want?
Answer: a good REALTOR
REALTOR are at the forefront of the market. No one else but us walks side by side with buyers in to every property, looking for that perfect home that is priced at a point that they are willing to spend. Agents know what the real estate headlines are going to be weeks before you read them in the paper; and that's because the paper reports old data and news, while we work in the market.
So if we cycle full circle back to the beginning of this blog, I look like a hypocrite, right? I told you I often times can't answer what a home is worth by pointing and looking at it but shouldn't I be able to if I am a REALTOR? NOPE! That would be a disservice to the public if I gave uneducated information for the sole purpose of answering your question quickly.
What I do excel in is researching, doing my due diligence to study the market and coming back to you with an educated opinion of what that home is worth.
So don't stop asking me what I think homes are worth, and understand when an answer may not roll off my tongue.