How to Calculate Home Values
A variety of factors can affect your home value
By Glyn Sheridan
Learn how you can determine a realistic fair market value for your home . The value of a home fluctuates with the economy and the local housing demand as well as the home's condition, its location and amenities. If you're planning to sell your home or you want to obtain financing against the equity in your home, you can come up with a fairly accurate value by comparing your home to the cost of homes nearby that were sold recently.
- What You Need to Know
- Only a professional appraiser can give you an accurate value for your home.
- Home improvement projects can add value to your home. Keep records and receipts of all such work.
- Measurements and photographs of your home and detail sheets from a real estate broker from the recent sales of nearby homes can help you calculate your home's value.
Choose comparable sales (comps) from homes that are similar to yours in style, age and size. If you own a ranch house, select comps from other ranch houses that sold within the past 6 months. To calculate your home's value accurately, compare it to similar properties. If your home has an individual style or design, choose homes that you feel are within the same price range and those in close proximity to yours.
Draw a table on a sheet of paper with a column for your home and additional columns for each comp you will use. Put your home address in the first column and each subsequent comp address at the top of the rest of the columns.
List the factors that influence the value of your home on the side of the paper, including living space, garage type, basement, yard size, number of bedrooms, number of bathrooms and all additional rooms. To that list, add flooring, interior finish, heat and air, age of home and special features, such as spas or swimming pools. If you have recent home sale detail sheets, include all of those features.
Write in the sales price just under the address for each comp you are using, but leave this space blank for your own home. You will fill it in after you calculate your home's value.
Compare each feature on your list, using your home as the target against the comps, and give each feature a monetary value. For example, if Comp 1 has brand new carpet and your home has old stained carpet, estimate the cost of new carpeting, and enter this as a negative value under your home's column. If you estimate the cost of new carpet at $3,500, then you would enter $3,500 for your home, but you would add that amount to the comp's column.
Add a value to your home's column when the value of a feature in your home exceeds the value of a comp's. For example, suppose you just installed a new fence worth $6,000 and none of the comp homes have fences. In the "fencing" row on your sheet you would add $6,000 in your home's column and subtract $6,000 from the comp's column. Repeat this process for every feature on your list and for every comp you're using.
Recalculate the prices of the comp homes by adding and subtracting the adjustment values when you finish entering the comparison costs. This is the "Adjusted Sales Price." Add the adjusted prices of the comps together, and divide by the number of comps you used. If you use three comps and the adjusted costs are $85,000, $110,000 and $105,000, add them for a total of $300,000, then divide by 3. That gives you an estimated home value of $100,000.
About the Author
Glyn Sheridan is a regular contributor to DexKnows.
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