What’s Your Home Actually Worth?

What’s Your Home Actually Worth?

 

Discover What Buyers Will Pay in Today’s Market

 

It’s easy to look up how much money you have in your savings account or the real-time value of your stock investments. But determining the dollar value of a home is trickier.

As a seller, knowing your home’s worth helps you price it correctly when you put it up for sale. If you price it too high, it may sit on the market. But price it too low and you may be losing out on a good chunk of money (nobody wants that!). For buyers, it’s important to know a home’s worth before you make an offer. You want your offer to be competitive, but you don’t want to overpay for the property.

Even if you’re not a buyer or seller right now, as a current homeowner you might just be curious about the value of your home. Keeping track of your home’s worth year over year helps you understand the trends in your market. So when you are ready to sell, you can take advantage of a good window of opportunity.

The good news is, a trained real estate agent—who understands the nuances of your particular neighborhood—can determine the true market value of your property … and at no cost to you!

 

THE THREE TYPES OF HOME VALUES

When you start the process of buying or selling a home, you’ll frequently hear the words appraised value, assessed value, and true market value. It’s important to know the difference between each one so you can make better, informed decisions.

Appraised Value

A professional appraiser is in charge of determining the appraised value of a home. These appraisals are typically required by a lender when a buyer is financing the property. And while the lender is the one requiring this information, the appraiser does not work for the lender.1Your appraiser should be an objective, licensed professional who doesn’t have allegiance to the buyer, seller, or lender—no matter who is paying their fee.

The number the appraiser comes up with (the appraised value) assures the lender that the buyer is not overpaying for the property. For example, imagine a seller lists a home for $400,000. They reach a deal with the buyer to sell the home for $375,000. However, if an appraiser evaluates the property and determines that the appraised value is actually $325,000, then the lender will not lend for an amount higher than that appraised value of $325,000.2

When figuring out this number, an appraiser will compare the property to similar homes in your neighborhood, and they’ll evaluate factors such as location, square footage, appliances, upgrades, improvements, and the interior and exterior of the home. 

Assessed Value

The assessed value of a home is determined by your local municipal property assessor. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.3

To come up with this value, your assessor will evaluate what comparable homes in the neighborhood have sold for, the size of your home, age, overall condition, and any improvements or upgrades that have been made. However, most assessors don’t have full access to your home, so their information is limited.

Assessments are done annually to determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. So, if the assessor determines that the value of the home is $300,000, but the county uses a 70% multiplier, the assessed value of the home would be $210,000 for tax purposes.4

If your assessed value isn’t as high as you envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes. If you’re interested in appealing your property tax assessment, let us know. We offer complimentary assistance and would be happy to help you build your case.

True Market Value

True market value is established by your real estate agent. It basically refers to the value that a buyer is willing to pay for the property. A good real estate agent is an expert in determining true market value because they have hands-on experience buying and selling properties. They understand the mindsets of buyers in your market and know what they’ll pay for a desirable house, townhouse, or condo.

As a seller, knowing your true market value is important because it helps you choose how much to list your property for. It can also help you decide if you want to make any improvements to your home before putting it on the market. Your agent can help you figure out which updates and upgrades will have the biggest impact on your true market value.

 

WHAT’S THE DEAL WITH ONLINE CALCULATORS?

When figuring out your home’s value, you might be tempted to see what popular real estate sites like Zillow, Redfin, and Trulia have to say. When you use an online calculator to determine your home’s value on these sites, it is just an estimate. It’s not an actual appraisal or the “true market value.” These sites all have their own algorithms for coming up with their estimates. For example, Zillow comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” 5

These online estimates can be a great starting point for opening up the conversation with your real estate agent about your home’s worth. But even Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site says that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.”

Having an agent involved in this process is essential because they understand the market better than a computer ever could. They’re showing property in your city every single day, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has most likely worked with all of them, so they understand what every segment in your market is specifically looking for.

 

HOW AN AGENT FINDS YOUR HOME’S TRUE MARKET VALUE

So, how does an actual real estate agent determine true market value? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:6

  • Neighborhood sales– Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for and what they have in common with your house.
  • The exterior – What does your home look like from the outside? Your agent will factor in curb appeal, the style of the house, the front and backyard, and anything else that impacts how the house looks to everyone walking and driving by.
  • The interior– This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
  • Age of the home – Whether you have a newer or older home affects the number your agent comes up with as part of their assessment.
  • Style of the home – The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
  • Market trends –Because a local agent has so much experience in your market, they have their finger on the pulse of your area’s trends and know what buyers are willing to pay for a property like yours.
  • Location, location, location– This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.

A computer algorithm simply can’t take all of these factors into account when calculating the value of your home. The reality is, nothing beats the accuracy of a real estate agent or professional appraiser when it comes to determining a home’s true market value.

 

YOUR AGENT IS THERE EVERY STEP OF THE WAY

Determining a home’s true market value is a real estate agent’s forte. If you’re a seller, your agent will help you find your home’s market value so you can list it at the right price.

For buyers, your agent will help you determine the value so you can come up with a fair offer. Your agent can also set up a personalized home search on the Multiple Listing Service (MLS) for you so you’ll receive emails of listings that meet your criteria. This will help you see what’s out there in your city and how properties are being priced.

Get a Complimentary Report With Your Home’s True Market Value

Curious about your home’s true market value? Please call us to request a free, no-obligation Comparative Market Analysis to find out exactly how much your home is worth!

 

Sources:

 

  1. Chicago Tribune –

https://www.chicagotribune.com/suburbs/chi-ugc-article-what-is-the-difference-between-market-value-a-2013-09-30-story.html

  1. SFGATE –

https://homeguides.sfgate.com/market-value-vs-appraised-value-1206.html

  1. ValuePenguin –

https://www.valuepenguin.com/mortgages/what-is-the-assessed-value-of-a-house

  1. Movoto –

https://www.movoto.com/blog/homeownership/assessed-value-vs-market-value/

  1. Zillow –

https://www.zillow.com/how-much-is-my-home-worth/

  1. com –

https://www.realtor.com/advice/sell/assessed-value-vs-market-value-difference/

 

Real Estate 2018: What to Expect

Real Estate 2018: What to Expect

As we head into a new year, the most common question we receive is, “What’s the outlook for real estate in 2018?”

It’s not just potential buyers and sellers who are curious; homeowners also want reassurance their home’s value is going up. The good news is that a strong U.S. economy, coupled with low unemployment rates, is expected to drive continued real estate growth in 2018. However, changes on the horizon could significantly impact you if you plan to buy, sell or refinance this year.

HOME VALUES WILL CONTINUE TO RISE

Get ready for another strong year! U.S. home values and sales volume will continue to rise in 2018.

Experts agree that home prices will increase in 2018, but predict a slower rate of appreciation than 2017, which clocked in at nearly 7 percent nationwide. National Association of Realtors (NAR) Chief Economist Lawrence Yun predicts a growth rate this year of 5.5 percent,1 while Freddie Mac’s September Outlook Report forecasts a rate of 4.9 percent. Either way, all indicators point towards continued growth in 2018.2

What does it mean for you? If you’re a current homeowner, congratulations! Real estate proves once again to be a solid investment over the long term. And if you’re considering selling this year, there’s never been a better time. Contact us to request a free Comparative Market Analysis to find out how much you can expect your home to sell for under current market conditions.

If you’re in the market to buy this year, there’s good news for you, too. Although prices continue to rise, the rate of appreciation has slowed. Still, don’t wait any longer. Prices will continue to go up, so you’ll pay more six months from now than you would today. Call us to setup a free, no-obligation property search and get notified about listings that meet your criteria as soon as (or before) they hit the market.

NEW CONSTRUCTION WILL MAKE REAL ESTATE MORE ACCESSIBLE

Lack of inventory in the housing market has been a primary impediment to homeownership for many Americans. “Ten years ago, the problem in the housing market was lack of buyers,” says Yun. “Today, the problem is lack of sellers. Inventory levels are near historic lows.”3

Yun also notes, “The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent. Despite improving confidence [in 2017] from renters that now is a good time to buy a home, the inability for them to do so is causing them to miss out on the significant wealth gains that homeowners have benefitted from through rising home values.”1

The good news? Yun expects a 9.4 percentage point increase in single-family new home construction starts.4

Economists at Freddie Mac make a similar prediction. “Existing home sales are unlikely to increase much going forward. Limited inventory will remain a consistent problem … Growth in home sales will be primarily driven by new home sales, which should continue to grind higher with single-family construction.”2

Robert Dietz, chief economist at the National Association of Home Builders, agrees. “The markets that are going to grow are ones where builders can add that entry level product.”5

What does it mean for you? If you’ve been frustrated by lack of inventory in the past, 2018 may bring new opportunities for you to find a budget-friendly home that suits your needs. Give us a call to discuss options for new construction in our area.

MILLENNIALS WILL MOVE TO THE SUBURBS

The new entry-level construction will come with a catch though … it will be located in the suburbs, where the availability of land and fewer zoning requirements make it more cost-effective to build. Economists predict that’s where millennials and first-time buyers will flock for the greater variety of homes at affordable prices.6

Rising home prices, a sluggish job market, and an increase in student loan debt made homeownership largely unattainable for many millennials in past years. However, there’s significant evidence that this trend is turning around. For the fourth year a row, the National Association of Realtors’ 2017 Home Buyer and Seller Generational Trends survey found that millennials were the largest group of homebuyers.7

As millennials age, they are settling down and having families, which has prompted an increasing demand for larger but affordable homes. Thus, many are flocking to the suburbs, with 57 percent of millennial buyers opting for a suburban location.

What does it mean for you? If you’re a millennial who has been priced out of urban living, or is looking for more space for your growing family, a number of suburbs in our area have a lot to offer. We can point you towards the communities that will best meet your needs.

And if you’re a suburban homeowner with plans to sell, give us a call. We know how to market your home to millennials … and can help you sell quickly for top dollar by appealing to this growing market segment! 

BOOMERANG BUYERS WILL RETURN TO THE MARKET

“Boomerang buyers” comprise the nearly 10 million Americans who lost their homes to foreclosure or short sales during the housing recession of 2006 to 2014.

According to MyFico.com, a foreclosure remains on a credit report for seven years. It takes many boomerang buyers at least that long to raise their credit score and save up enough cash to qualify for a new mortgage.8

With this “seven-year window” in mind, RealtyTrac predicts that the largest wave of boomerang buyers – more than 1.3 million – will be eligible to re-enter the housing market in 2018.9

Markets likely to see the highest influx of boomerang buyers are those that had a high percentage of foreclosures AND have remained affordable. The majority of boomerang buyers are middle-class Gen Xers or Baby Boomers. Expect to see even more competition for entry-level homes in those markets.

What does it mean for you? If you’re a boomerang buyer, we understand your unique circumstances. We can help you navigate the real estate process and write competitive offers that will play to your strengths. Contact us to discuss your options.

NEW TAX LEGISLATION WILL IMPACT HOMEOWNER DEDUCTIONS

The “Tax Cuts and Jobs Act” passed at the end of 2017 nearly doubles the standard deduction, so far fewer Americans are expected to itemize this year. For those who do, however, it could mean less homeowner deductions are available than in the past.

Previously, homeowners could deduct interest paid on the first $1 million of mortgage debt, but that threshold has been lowered to $750,000 for new mortgages. (Existing mortgages will not be impacted.)

Additionally, taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. The new legislation restricts this deduction to $10,000. It also eliminates the deduction for moving expenses (except for members of the Armed Forces) and interest on home equity loans unless the proceeds are used to substantially improve the residence.10

It’s yet to be seen how the tax bill will impact the real estate market overall. While some economists predict a price reduction in certain markets, Republican lawmakers project the bill will increase take-home pay and stimulate the economy overall. According to Realtor.com Senior Economist Joseph Kirchner, “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already.”11

What does it mean for you? If you’re an existing homeowner, be sure to consult a tax professional if you’re concerned about the impact the new tax bill could have on you.

And if you’re planning to buy or sell this year, we can help you determine how the tax bill could affect demand in your current or target neighborhood and price range.

INTEREST RATES WILL RISE

No one knows exactly what will happen with mortgage rates this year, but the Mortgage Bankers Association anticipates the Federal Reserve will raise rates three times in 2018, with Freddie Mac’s 30-year fixed rate mortgage reaching 4.8 percent by the end of Q4, up from around 4 percent at the end of 2017.12

Kiplinger.com Economist David Payne also predicts interests rates will rise this year, with short-term rates outpacing long-term rates as the Fed aims to curb inflation in a tightening job market. He predicts the bank prime rate that home equity loans are based on will increase from 4.25 percent to 5 percent by the end of 2018. 13

What does it mean for you? If you’re in the market to buy, act now. Rising interest rates will decrease your purchasing power, so act quickly before interest rates go up. Give us a call today to get your home search started.

And if you’re a current homeowner who is considering refinancing or a home equity loan, don’t wait. We can help you estimate your property’s fair market value so you’ll be prepared before contacting a lender.

 

2018 ACTION PLAN

If you plan to BUY this year:

1.     Get pre-approved for a mortgage. If you plan to finance part of your home purchase, getting pre-approved for a mortgage will give you a jump-start on the paperwork and provide an advantage over other buyers in a competitive market. The added bonus: you will find out how much you can afford to borrow and budget accordingly.

2.     Create your wish list. How many bedrooms and bathrooms do you need? How far are you willing to commute to work? What’s most important to you in a home? We can set up a customized search that meets your criteria to help you find the perfect home for you.

3.     Come to our office. The buying process can be tricky. We’d love to guide you through it. We can help you find a home that fits your needs and budget, all at no cost to you. Give us a call to schedule an appointment today!

If you plan to SELL this year:

1.     Call us for a FREE Comparative Market Analysis. A CMA not only gives you the current market value of your home, it’ll also show how your home compares to others in the area. This will help us determine which repairs and upgrades may be required to get top dollar for your property … and it will help us price your home correctly once you’re ready to list.

2.     Prep your home for the market. Most buyers want a home they can move into right away, without having to make extensive repairs and upgrades. We can help you determine which ones are worth the time and expense to deliver maximum results.

3.     Start decluttering. Help your buyers see themselves in your home by packing up personal items and things you don’t use regularly and storing them in an attic or storage locker. This will make your home appear larger, make it easier to stage … and get you one step closer to moving when the time comes!

WE’RE HERE TO HELP

While national real estate numbers and predictions can provide a “big-picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market, and the local issues that are likely to drive home values in your particular neighborhood. If you have specific questions, or would like more information about where we see real estate headed in our area, please give us a call! We’d love to discuss how issues here at home are likely to impact your desire to buy or a sell a home this year.

Sources:

  1. Inman News –
    https://www.inman.com/2017/11/03/what-to-expect-from-the-2018-housing-market/
  2. Freddie Mac September Outlook Report –
    http://www.freddiemac.com/research/outlook/20170921_looking_ahead_to_2018.html
  3. Marketplace.org –
    https://www.marketplace.org/2017/07/05/economy/tight-inventory-slows-housing-market-down-0
  4. National Association of Realtors Press Release –
    https://www.prnewswire.com/news-releases/existing-home-sales-to-grow-37-percent-in-2018-but-inventory-shortages-and-tax-reform-effects-loom-300549447.html
  5. Fox Business News –
    http://www.foxbusiness.com/features/2017/11/27/entry-level-buyers-drive-solid-new-home-sales.html
  6. Zillow Research –
    https://www.zillow.com/research/2018-predictions-17217/
  7. National Association of Realtors’ Home Buyer and Seller Generational Trends Report –
    https://www.nar.realtor/research-and-statistics/research-reports/home-buyer-and-seller-generational-trends
  8. com –
    https://www.myfico.com/crediteducation/questions/foreclosure-fico-score-affect.aspx
  9. RealtyTrac –
    http://www.realtytrac.com/news/foreclosure-trends/boomerang-buyers/
  10. National Association of Realtors –
    https://www.nar.realtor/taxes/tax-reform/the-tax-cuts-and-jobs-act-what-it-means-for-homeowners-and-real-estate-professionals
  11. Realtor.com –
    https://www.realtor.com/news/real-estate-news/tax-cuts-survey/
  12. Mortgage Bankers Association Economic Forecast –
    https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary
  13. Kiplinger Economic Forecast –
    https://www.kiplinger.com/article/business/T019-C000-S010-interest-rate-forecast.html#iOf4mkSFvvTmi2wr.99