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Determining The Value Of Your Home In Today’s Market
It’s no secret that home values have dropped dramatically in virtually every market in the United States over the last few years. Several states have seen frightening price adjustments downward. Florida, California, Nevada, and Arizona lead the nation with the decline of residential home values. And while these states appear to have slowed their declines, at least temporarily, other states are accelerating theirs.
So if prices are dropping how can you tell how much your house is worth? These days one can’t always depend upon time-tested methods for determining the price of any residential property. But just so you are aware of how the typical home has been valued in the past we’ll look at the methodology for pricing a home.
The replacement value of your home is primarily determined by the cost that would be incurred to rebuild the structure as it is from the ground up. The replacement value would include all of the building materials necessary to return your home to its present condition in the event it had to be rebuilt. This method of determining the value of a residential property is most often used by insurance companies. It’s also one of several criteria for value used by real estate appraisers in arriving at the value of a house.
Real Estate Owned or REO
Never before have we seen so many foreclosures in the United States as we are seeing today. And there seems to be no end in sight. Many lenders are carrying enormous real estate owned (REO) inventories. These are properties a lender has repossessed in foreclosure. Since banks are not in the business of owning or maintaining real estate they need to sell these properties as quickly as possible. Gone are the days when a lender wanting to unload a foreclosed home could simply list the home for sale with a Realtor and sell it easily.
Comparable Sales or Comps
These days lenders need to market the property speedily and at the lowest possible cost. In the past a bank owned property would be sold like any other. The bank would depend upon a professional appraisal as the determiner of the home’s value. But in today’s anxiety-ridden marketplace an appraisal does nothing more than add additional expense to the sale of a property that has already fallen dramatically in price. So to determine the value of a home the lender now often uses the comparable sale method of determining the value of a home.
This is a relatively simple way to determine a home’s value. The bank contracts with a local licensed broker to deliver the sales figures on similar homes to the one in question. These are all properties that have closed within a certain period of time. In the past a qualified appraiser would deliver ‘comps’ or comparable prices based on the similarity of homes sold but today that duty has fallen largely to real estate brokers.
For example, if a bank ordered comps on a 1600 square foot ranch style home in Palm Springs sitting on a typical city lot the broker would search for homes that have sold recently meeting the same criteria. There are also other factors that would be taken into consideration such as the various amenities or lack thereof, which might add or take away from the final value, but this is the primary principle of the comparable sales method.
An appraisal incorporates all of the above methods in determining the home value. An appraiser might offer an extensive opinion of valuation based on bids from builders based on the cost of construction per square foot. And he would surely include current comps as well.
Determining the value of a home these days, as always, is probably more an art than a science. And it would seem that with the market going through its various convulsions of the past few years there’s been just a little bit of witchcraft thrown in to boot
Online Home Valuation Sources
Homeowners can depend on Home-Values.com for a free analysis of a home virtually anywhere in America. Home-Values.com agents, not only offers information on the value of any home in the United States, but they also provide valuable information on current real estate market trends, mortgages, short sales, foreclosures and more. Without a doubt, Home-Values.com is great for getting a free comparative market analysis on the value of your home.
Online valuation of homes is determined by the agent’s ability to access real estate sales information locally for you. Countless sales figures are taken from your local neighborhood and other municipalities to make sure you are given an accurate valuation of your home in a timely fashion.
If you’ve been watching home prices fall over the last two or three years you might be holding your breath wondering when things might stabilize. Perhaps you’d be better off not knowing the actual value of your home, especially if you reside in one of the hardest hit markets such as California, Arizona or Florida. However, if you want the most accurate and up-to-date information it’s probably not any farther away than your telephone.
Real Estate Professionals
Active real estate agents have their fingers on the pulse of their markets like no other individuals. Show me an agent out there hustling and I’ll show you someone who could probably give you an unofficial estimate of the value of your home inside a couple of minutes.
I say an unofficial estimate because a true real estate pro wouldn’t commit to offering an opinion on the value of your house without first looking at applicable comps. The term “comps” is short for comparable sales and incorporates sales figures for similar homes that have actually sold within your marketplace. Good Realtors live and breath this information as it is often essential to their business.
So, if you’re wondering how much value you have in your home in this market you might want to stop by one of the sites mentioned above and check it out. But if you’re looking for an accurate estimate as to your home’s value, be sure to consult with a real estate professional.
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