Do you know what the value of your home is? Many people have a number in mind that they’ll share, but very few people know what that number reflects. Understanding home value is essential so you know the difference between the market value, assessed value and appraised value.
With the power of the internet, many home buyers and sellers receive information that is incorrect. You need to use wisdom in the tools you use to do research. Understanding your home value helps you to avoid common pitfalls.
Home Appraised Value
Once the seller and buyer come to an agreement, the buyer’s bank gets involved. This home appraised value determined by the bank is needed before the lender approves a loan. The reason for this appraisal is to ensure that the price is a fair market value or less.
Many sellers feel that their property is worth more than it is; generally because of emotional attachment. Wouldn’t it be great if everyone received more money than what the house is worth, but that simply isn’t how it works. When the buyer goes to their bank for a loan, they will deny it if the price agreed upon is higher than fair market value. That means you can’t expect them to fork over $350,000 when the house is only valued at $300,000.
If the buyer does agree to pay too much and the bank stops them, there are a few options to move forward:
Negotiate a New Sale Price
If the lender finds the fair market value is lower than the sale price, both the seller and buyer have the chance to renegotiate. This new number must be equal to or less than that value. This often upsets the seller, but it’s the only way they will sell their home. This is the most common solution.
Contest the Appraisal
There’s also the option to contest the appraisal. This is usually ineffective, but you would still want to use a real estate market expert. They can supply recent home sales they feel are comparable to yours. You rarely have the chance to get them to change their mind, but sometimes it’s worth it.
Buyer Covers the Difference
Another option is that the buyer covers the difference through their down payment. Unless someone is really in love with the home, they aren’t going to turn over more cash than needed.
Cancel the Contract
If no solution is found, the contract is canceled. The buyer also receives their deposit back and both parties are free of any obligation.
Home Assessed Value
Another home value to understand is the home assessed value. This is very different from your market value and appraised value. Anyone can see your home assessed value by visiting the county or municipality website.
It’s a common misconception that this home value is related to what it’s worth, but that’s false. This number is strictly the tax value on the home as per the municipality.
Assessments are contested from time to time through your local office. There’s a time-frame where you can challenge the value. While there’s no guarantee they will adjust it, there are some ways to increase your chances. Present a CMA, comparable market analysis from your realtor. You can also have your own appraisal done, but this costs anywhere from $300 to $500.
Home Market Value
This is related to the appraised value, but there are still some differences. Your home market value is determined by a licensed or unlicensed professional and the appraisal is done by a licensed appraiser.
A realtor determines the market value by looking at comparable options in recent sales. They’ll examine pending sales, closed sales plus expired listings. In an ideal world, this data is collected from the past six months. If they can’t find comparable data, they’ll increase the time frame to twelve months. You can’t use a home from two years ago because it doesn’t reflect the present market.
Determining the right home market value avoids frustration in the end. Having the correctly priced home makes everyone happy: buyer and seller.
Still Confused about Home Value?
We know that understanding the differences is confusing. We’ve been dealing with them for many years and have lots of experience which is how we are able to offer our customers a fair market value for their home – in cash.
If you don’t want to deal with the hassles of selling your home, we are ready to help you. Let us give you a free and fair offer on your property. We’ve helped countless people just like you that need to sell for various reasons. Maybe you’re facing a divorce or foreclosure? Our services are quick and speedy so you can move on with your life.
Contact us and let us help you weed through the home value confusion.
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