How to estimate the market value of your home
You want to sell your house but have no idea of how much to ask. Assessing the market value of your home can be difficult, especially if you are not sure on how to go about it.
An inaccurate estimate of your property’s value can have negative consequences
- If you ask too much, you will probably have to either revise your price down or wait some time before finding a buyer.
- If the asking price is too low, you will literally lose money on the sale!
To obtain a proper estimate, it is advisable to call on the services of a chartered appraiser or, better yet, a real estate broker.
Not only do brokers have an in-depth knowledge of the market, they also carefully monitor changes in property values. They can also provide you with valuable advice on the work you can do to obtain the best price on the market. Even if you do use the services of a real estate expert, it helps to understand what criteria they use when making a valuation.
Here is an overview of the methods and factors that
influence the market value of a home.
Comparable properties
All real estate brokers point out that it is essential to take comparable properties (sometimes known as “comps”) into account. What does that involve? This is done by checking the asking price of other properties similar to yours.
For instance, if you want to sell a duplex, your broker will research the recent selling prices of “comparable” duplexes. In other words, your property is compared to others with similar attributes. These criteria would include:
- Location, including the neighbourhood and available services
- Square footage and number of rooms
- Age and condition of the property
- Work done or required, etc.
Using this information, your real estate broker calculates a price or price range that corresponds to the market value of your house. In some cases, after examining all the comparable properties, the broker may advise you on renovations you could do that would increase the value of your property inexpensively.
How about municipal property assessments?
Every three years, your municipality reviews the value of your home to determine the amount of taxes you will have to pay. The value of the municipal property assessment is useful information when setting the selling price. However, it should not be used as your selling price since the actual market value may be very different from that assessed by the municipal appraiser.
In fact, a property can sell for below the municipal
property assessment value or, as is usually the case, well above. As the last
few years have shown us, market conditions can quickly change. Municipal
property assessments simply cannot keep up with these rapid changes.
Replacement cost
Another method to estimate the property’s value is to add the value of the land to the replacement cost of the building. This complex calculation requires taking depreciation into account and requires the assistance of a chartered appraiser.
Determining the market value of an income property
If you want to sell a rental property (income property), the common method is to set the value according to the rental income.
There are various methods you can use to estimate the value based on income. However, it is strongly
recommended that you use the expert services of a real estate broker when trying to determine the real market value of
your rental property.
An essential first step
A fair market-true valuation is an essential prerequisite for getting the most out of your real estate investment. A property valued at a fair price in relation to the market is a property that gives buyers confidence and is easier to sell.