What’s my home really worth, you ask? As homeowners, we cannot solely rely on the accuracy of our civic property tax assessments to definitively give us an idea of what fair market value may be for our homes. The values provided on that tax assessment was most likely determined during a time in the previous year, the market may have changed (a little or a lot) since then, and quite possibly not in the direction you might have thought or hoped for.
In real estate, the heart of the matter is that true market value is determined by what a buyer is willing to pay for a home, and of course the amount the seller is willing to take for the home. In practice, Realtors® are quite often relied upon to provide a list or asking prices for homes that they are selling. The reality is, however, a buyer truly only cares about what they think a home is worth and what they would like to pay for a home. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, along with the value the seller will accept.
When purchasing a home through organized real estate or in a private transaction, there are things you simply should not rely on when trying to put a value your home. You cannot rely on the buyer’s opinion of value nor can you rely on the seller’s opinion of value, as these numbers can be very far apart. You also cannot totally rely on the Internet, your neighbors, your friends or your family members opinions for a fair market value of a property either.
There are a few things that you can do which in the end you can rely on: There are typically two kinds of professional appraisals that are used in the industry The marketing appraisal, which is typically ordered by a seller to prove value and also the financing appraisal, which is often required by the bank to ensure the home is worth the value being borrowed. The financing appraisal is a less in-depth review and is essentially answering the question; is this property worth the agreed upon purchase/sale price.
While marketing appraisals are more in depth, the lender is not concerned with the actual market value over and above the purchase/sale price. The lender or seller just want the simple question answered; what is the value of the home. It is rare these days that an appraisal for refinancing a home has a value that differs significantly, if it all, from the sale price. It is not uncommon to see a financing appraisal come in at the exact number or slightly over the sale price.
To get a good gauge on the value of your home, a professional appraisal is a great start to get in the ballpark, even that isn’t a 100% accurate. Another great method would be to get a market evaluation from an experienced, active, local Realtor® or two. This in combination with a professional appraisal is ultimately the best way to determine fair market value.
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