If you’re planning to refinance or sell your home, perhaps the first thing you need to consider is how much it’s worth. Unfortunately, getting an accurate estimate of your home’s value today takes some homework.
How accurate are online calculators?
You’ve probably encountered calculators on real estate sites that make it look easy to value your home. By entering your address, you get a number or a range of values. Unfortunately, not all of these are accurate.
Try out a few calculators and you’ll end up with an uncomfortably wide range of values. The reason is that the quality and currency of their data varies. Moreover, none can look inside a home and see how well it has been maintained or improved.
Appraisals are the most effective
Whether you are refinancing, selling or buying, the only valuation that counts is the appraisal from a licensed appraiser hired by the lender who is doing your refinancing or financing a prospective buyer.
Even if the buyer and seller agree on a price, an appraisal lower than the agreed on price will force the buyer to come up with more cash or the seller to lower his price to save the deal. During times like these when prices are rising, appraisals often are lower than contract prices.
In fact, studies show that owners overestimate the value of their homes about 11 percent of the time.[1] In February, appraisal issues killed 11 percent all deals that were terminated before closing.[2]
Should you get an appraisal before listing?
Getting the home’s value right is the first step in pricing a home before it is listed. Real estate agents can help you decide how to price your home for the market, but if you want to what it’s actually worth before you list it, you should hire an appraiser (generally around $500).
There’s one more reason that a current appraisal makes sense for sellers. Appraisal data is collected and aggregated by data services who sell it to websites with home valuation calculators. Getting a fresh appraisal into the mix increases the odds that the value that buyers see when they surf your listing will be more accurate and current.
Buyers can also hire their appraiser if they do not trust their lender’s appraisal, but fighting an appraisal is rarely a successful strategy. It is better to do some homework before making an offer, especially if you are relying on the values generated by website calculators.
How to find comps
When appraisers determine valuations, they select three or more houses of roughly the same number or beds and baths, same square footage, age and lot size that have sold within the past six months—or ideally, the past 90 days. In a busy time of year, like the spring or early summer, market trends can change prices significantly. These comparable homes, or “comps,” should also be located as close as possible to the house being appraised.
Finding this data can be difficult for the layperson. Real estate agents have access to it, though. They can locate comps using the same criteria as an appraiser and create an estimate of a house’s value, called a comparative market analysis or CMA. A good CMA provides a useful analysis of current market conditions as well as a range of the house under consideration. Best, of all, it is usually free.
What does the future hold?
New methods of valuing houses using “Big Data” techniques that require extensive data from millions of properties are now being developed for use by investors, appraisers and lenders. Someday soon, they also will be available to real estate consumers.
[1] http://ift.tt/1WMXa0k
[2] Realtors Confidence Index, February 2016.
from Total Mortgage Underwritings Blog http://ift.tt/1XSsXMX
No comments:
Post a Comment