What’s my home worth and how do I find out?
The fact is, the market value of your home is not necessarily what you feel it’s worth or even equal to the amount of money you have spent on it. It may be less-or more.
If you’re selling, the answer may be as close as your local real estate agent. The way he determines value is by coming up with “comps”-comparing your home to similar ones that have sold recently in your neighborhood.
But you may be contemplating selling the place yourself-or you may need to know the market value for another reason-to dispute your property tax bill, for instance, or just to find out how well you’ve kept up with the Joneses. Coming up with the figures yourself may not be easy. The process is complicated by a number of factors, not the least of which is the owner’s emotional attachment to the property.
So, before you attempt to try to put a value on your home, it probably would help to know how the pros do it.
Ask the experts
Marlene Bass, an agent for Prudential Preferred Properties in Northbrook, describes the process an agent might go through to arrive at the correct asking price for a home:
“When someone asks us for a market evaluation of their home, we go out to see the property-alone or with other members of our office. After we’ve walked through the house and taken the room sizes, we go back to the computer to find out what’s on the market, what’s pending, what’s expired (didn’t sell and is off the market), and what’s sold recently.
“Then we prepare an extensive report. The regional board (of Realtors) provides us with data or we can pull it up through Prudential’s program, which provides the same data in report form. Then if there’s any confusion as to the worth of the property, we consult with the other people who walked through the house.
“We tell the customer what’s on the market in their price range-their competition. We examine everything before we set a price.”
So it’s obvious the agent doesn’t just pull a price out of a hat. If you’re going to try to value your home on your own, it’s going to take some work.
You need to be tuned in to the market and you can’t expect to determine the right price by just checking one source, says Randy Harmer, an executive recruiter in Chicago who has sold four homes-two in Lincoln Park, one in Park Ridge and one in Schaumburg-without the services of an agent.
“I’m the type of guy who likes to read real estate ads,” Harmer says. “And I’ll walk through a neighbor’s house when it’s on sale. I have a good pulse of what’s going on in the market. Even though my wife, Kim, and I hope to stay in the home we’re in now for a long time, I would say that I have my antennae up on a daily basis.”
The nuances
But there’s much more that goes into determining the proper price for a home, and that’s where the issue becomes cloudy. Say, a four-bedroom brick ranch a couple of blocks away sold recently for $300,000. You own a four-bedroom brick ranch, so should yours fetch $300,000?
Hal Cowell, a broker associate for Baird and Warner in Evanston, cautions that if you’re comparing your house with another, you must also take into account some of the more abstract variables.
“Consider the size of the lot,” Cowell says, “the amenities, the condition of the roof. How updated is the kitchen? Does the house back up to a busy street, or is it near a railroad track? What is the condition of the electrical wiring and the furnace? You can’t just use the price that another house in the neighborhood sold for. There could be great differences between your home and your neighbor’s.”
This abstract area is where homeowners run into problems and where they run the risk of undervaluing or overpricing their home. What if your home is not like the other homes in the neighborhood that have sold recently? It may have an extra bedroom that’s been added on, or a larger patio than anyone else has. Maybe it’s a Victorian in the midst of bungalows.
Rick Drucker, broker associate for Kahn Realty in Chicago, says, “In a high-rise it’s easy to evaluate because the units are so similar. A development in the suburbs also has homes that are fairly similar. But in most neighborhoods in the city there can be big differences. . . .”
Out of bounds?
Speaking of neighborhoods, how exactly do you determine what yours is? In trying to value your home, it can be tempting to venture a bit outside the bounds of your community-where homes may be selling for more. Eileen Brennan, an agent at Rubloff in Chicago, says that neighborhoods are not always clearly defined. “Does anyone know exactly where the line is between Lincoln Park and De Paul?,” she says.
“And sometimes new ones pop up, such as East Village. Often it’s just custom that defines where a neighborhood’s boundaries are, and sometimes the envelope is pushed. Sometimes a new business opens and that’s what pushes it; they open and the area has a new name and it’s a new neighborhood. That can affect the value of your home.”
But, certainly, not all Chicago neighborhoods are alike and the identical home may be valued differently in two locations only a few blocks apart-or even across the street from each other. If you’re going to attempt to set a price for your home yourself, be sure you’re tuned into neighborhood boundaries.
Besides following the ads and looking at neighbors’ homes, Harmer did what a lot of people do when they’re trying to determine the right price for their home. He called in a real estate agent.
Free advice
How do agents feel about being asked to do this for a home that’s going up for sale by owner?
Susan Teper, real estate agent at Beliard, Gordon and Partners in Chicago, says she can’t imagine an agent refusing to do this because of the goodwill it’s likely to bring. “I’ve run comps for people and they’ve all sent me business,” she says. “Chances are they won’t sell their home on their own, anyway. They’ll bring in the agent.”
Though Teper feels it’s the agent who has the most concise information for the homeowner, other ways she suggests homeowners can put a price on their property are by checking newspapers for actual real estate transactions or by going to the county recorder of deeds office and pulling up prices of homes sold recently in the area.
Prudential’s Bass says it’s tough to go it on your own and many people call in agents to “pick their brains. Generally the seller who doesn’t get professional help will base the price on something similar that’s on the market at the same time and decide theirs is better, so they’ll ask a little more. If I were the buyer (of a home priced by the owner) I’d ask them to show me some justification for the price.”
An appraisal
Calling in an appraiser is another way for a homeowner to put a price on his home, but this costs money. Appraiser Gerry Cote, owner of Gerald Cote and Assoc. Inc. in Palatine, says that while he does most of his work for mortgage lenders, occasionally a homeowner calls him for an appraisal.
“We tap into the same sources that a Realtor does; we get information through the multiple listing service. Or from the county or township assessor’s office, which anyone can do on their own.”
Cote says he starts by inspecting and measuring the property to determine its overall size and condition, spending about a half hour at the house. Then he checks the sales of similar homes in the neighborhood and provides a report that includes an analysis of three other neighborhood homes that have sold recently.
The cost is $250 for a typical family home, but can range anywhere from $350 to $750 for a very expensive home, depending on the complexity of the property, Cote says.
Keven Maloney, a state certified appraiser and vice president of Maloney Appraisers in Chicago, says, “The only time you should (try to value your home) yourself is if you’re just plain curious. If you need to know the value of your home with any degree of accuracy you should hire a qualified, state-licensed appraiser.”
He insists that the small amount spent for an appraiser-his firm’s prices start at $275-is worth it to ensure that you are not under-valuing your home.
