A few days ago I called home values pendulums on steroids. They are swinging wildly. Others might suggest that the value of homes were like skydiving with a questionable parachute – you’re falling way too fast and you hope the ‘chute opens before you hit bottom.
Whatever you call this current real estate home market, most can agree it is difficult right now to find true home market value.
Before we jump in and look at the 5 step process to assist you in finding home values, let me present a definition of market value. The simple answer to the market value definition is: the price a willing buyer will pay a willing seller.
However, I think taking a closer look at the definition of home market value, or simply market value, is worth noting.
The Federal Office of the Comptroller of the Currency states market value is: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus…
The definition goes on and gets more detailed, but, in layman’s terms what this says is that market value is the price a buyer pays to a seller when they both know what they’re doing and the property has been exposed and available for sale. In ever simpler terms – what would someone pay for a home with a “for sale” sign in the yard?
That is the essence of home market value.
Ok, now let’s look at the five steps to determine what a home is worth, or the value of the home.
1) Start by looking at national, regional and local housing trends. National trends are everywhere – just make sure you’re looking at facts and not opinion on home values. Statewide or regional area trends are typically available somewhere on line for free if you can locate them. Here in Texas, the Texas A&M Real Estate Research Center puts out an excellent home value trends report. Contact your local appraiser, realtor or lender for a source in your area. You’ll notice your region could be substantially different from national trends –either for the better or worse. Home values continue to plummet in the Phoenix area, while some markets in Texas have had flat to slightly increasing values. Your local market probably has a Multiple Listing Service, or MLS, and most usually compile quarterly or regional data.
2) Pull up the current assessed value of a home and others in its market area. Look at the assessment history. Is the value trending up, down, or is it stagnant? This is a good initial research step that will just take a few minutes, assuming your assessor’s office has on-line data. Here’s a key – divide the total assessment by the home’s square footage and look for trends and consistency.
3) Talk to realtors. Notice I realtors, not realtor. Talk to several about home values in their market area. I find most realtors are pleasant and pretty chatty. Good places to talk to realtors (and appraisers for that matter) are at local Chamber or community events. Bad places to talk to realtors are church, the grocery store, or any other place where you may be intruding.
4) Talk to appraisers. Anyone truly seeking to know home values for their area needs a working, or at least talking relationship with a good appraiser. Realtors can be a source for quality appraisers, but do some research on your own.
5) Monitor listing prices in your area. Check your Sunday paper and other classified sources. Do you see a large number of “reduced” prices listed? Make a simple chart of homes/areas you’re familiar with. Are these home prices lower than you recall 6 months prior? Remember when it comes to determining the value of homes – data is king.
Ok, these five steps are not only the beginning, but also the cornerstones for determining values and home value trends in your area. Make a habit of tracking where home values are heading. Once you start you’ll develop a better eye for value and home pricing in general.