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One useful way is to look at homes in the neighborhood that have recently sold. Sales history, along with having an appraiser inspect the house and determine any peculiarities with your home that can give it more or less value. An appraiser can help determine market factors that affect your home's value over time also. These factors evolve with economic ups and downs. They could be related to changes in your local community, or things happening in the broader spectrum of things such as a stock market crash or ups and down in the GDP.
The cost of living in your City and the quality of living also affect the value of a home. For instance, a neighborhood with good schools is highly desirable for families with children, who constitute a significant portion of the new buyer market.
The inspection report from an appraiser can have a significant outcome on the overall price of a home. The more repairs listed on the inspection report, the more influence a buyer can negotiate when it comes down to the closing price of the home. For most new buyers, mortgage lenders require an inspection report to lend, and the inspection reports outcome is highly significant to mortgage lenders. This is so that in the case of a defaulted loan, they won’t have to make the repairs themselves.
The Appraisers Qualifications Board is responsible for issuing state licenses that allow someone to become qualified to appraise a house. This certification is a necessity for all appraisers that lenders will utilize in determining the value of a home. Lenders do not typically lend more than the appraised amount after a qualified appraiser has determined the value of a home. So if the appraised value is higher than the asking amount, the seller will either have to lower the price or make the necessary repairs to make up for the low appraisal. Then have the home re-appraised. These items could include, new bathrooms, new paint or structural issues such as foundations and termites. These issues are highly important to new buyers, as it is what will allow them to receive the amount they need to cover the cost of the new home.
Factors like GDP, economic growth, the unemployment rate also have an effect on the value of a home. The great recession was a good example of how the real estate and housing market affects the broader economy. When the value of the real estate property decreases,
a local community that has many jobs in mortgage financing and construction will have an increase in unemployment. This can then lead to a massive sell-off of real estate as homeowners liquidate their homes, leading to an oversaturated market, which further decreases the value of homes in that community.
When the IRS is determining how much taxes a homeowner will have to pay, they look at the value of your home. To know this number they use recently sold homes in your neighborhood and determine what factors are similar or different that make your home more or less valuable. Their methods have much room for error, which is why it is often appropriate for homeowners to have their homes re-appraised or contest IRS on the amount they have assessed their homes value at.
To calculate the amount the IRS has appraised your home at, you need to look at local tax rate, and then compare that rate to the amount they are charging you in property taxes. For instance, if the local tax rate is $10 for every $1000 of property value in your state, and you get a property tax bill of $3,000, then the IRS has appraised your home at $300,000.
But there is no exact science to a home appraisal, as it is something that changes daily, so with the correct data about your community, an appraiser and online home estimators, it is not difficult to appraise your home with 4% of error. Which could wind up being much more accurate than a quick appraisal someone working for the IRS came up with.
Another useful way to determine the value of a home without using online recourses like Zillow or Redfin is to add up all sales of the recently sold houses in your neighborhood and then divide by the number of houses, giving you the median. It is advantageous to choose homes that have similar size, appearance, square footage and age, which will then lead to a more accurate appraisal.
The housing price index on the Federal Housing Finance Agency’s (HPI) website is a useful tool for accurately understanding the value of your home in current market conditions. It works by measuring the average changes in home prices over time. The HPI does this by looking at the sales of the same house to new owners or by analyzing refinances on the same property. Looking at the HPI’s quarterly report is a good place to see how market fluctuations are affecting housing prices in the current economic climate.
Although determining the market value of a home is not an exact science by any means, there is no reason why an individual cannot gather all the necessary information to appraise their home within a margin of 0% to 4% of error. This can change the amount a lender will give you, increase the asking price you may be offering for your home, or change the amount you need to pay the IRS in property taxes. The bottom line is, lenders, the IRS, and realtors all like hard data. Luckily, that data is readily available for homeowners with a quick search using the resources above.
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