Here’s the scoop on four common home valuation methods.
As a homeowner, how do you know what your home is truly worth? Of course, value is relative, but there are several sources you can use for gauging how much your home is worth in today’s market. Let’s review them, shall we?
The first—and easiest—path that a lot of homeowners take is that of the Zillow Zestimate. While this online tool can be a great place to get a very general conception of your home’s value, I strongly caution against taking it as gospel. If you read Zillow’s fine print, you’ll see that Zestimates are only accurate 14% of the time, and here’s why: Texas is a non-disclosure state, so Zillow and similar sites with algorithms that are dependent on publicly available data are left having to feel around in the dark. Really, the only publicly available data that they can draw from are mortgage amounts, so keep that in mind when you’re reviewing your own Zestimate.
The second source of valuation is your county tax assessor. Every year, a county tax assessor tells you what they think your home is worth, but ultimately what you’re getting is an opinion—one that bears a heavy caveat, too. Think about it: No one ever argues that their home’s tax assessed value is too low. However, if it’s too high, we as homeowners will readily protest it. We win when the tax assessed value is low, which means that figure is the last thing we’ll want to use when hunting for top dollar on the open marketplace.
Then there’s market value. This deceptively simple term just refers to the amount a buyer is willing to pay (and that a seller is willing to accept) in any given market. Market value is indicative of all the various factors in play in the marketplace. Is there a shortage of inventory? Are interest rates low? Are our buyers being priced out of the market? Buyers will pay a premium for a premium property; what features constitute a “premium property” is something that’s always subject to change. (Consider, for example, how homebuyers in this period of COVID are putting a premium on homes with office spaces and larger yards).
What about appraised value? Appraisals are valid instruments used to protect the investor who’s loaning money on a property that’s being bought, sold, or perhaps refinanced. Appraisers, the third parties hired by lending institutions, use a uniform set of guidelines. Appraised value only factors in data from previous sales. It pays no mind to the current dynamics of the market or significant home improvements, making it quite dissimilar to market value.
There you have it: four common sources of valuation explained. Rather than searching for some perfect, static number, I believe that understanding your home’s value is all about establishing the right dialogue.
If you have questions about what your home is worth, I’m more than happy to talk those through with you. Just give me a call or send an email my way, and let’s get the conservation started!