How much is your home worth?
To answer this question, it depends on who you are asking and who is looking at it. A home insurance company, a mortgage lender, and a tax assessor all have different criteria to abide by when it comes to determining the value of your home.
Most likely, the value of your home is considerably less than it was a few years ago before the economic recession. Here’s how to break it down…
Do not be quick to call your homeowners insurance company to drop the value of the home – this might save you a few pennies now, but may cause your home under-insured since replacement cost and market value do not equate to the same number.
Talk with your insurance agent and formulate your home on 3 factors:
- The square footage of your home
- Price per square foot to rebuild (before applying any discounts from contractors)
- Any upgrades & amenities on your property
Each state has a different property tax structure, so check with the state you currently reside or are looking at moving to on how this value amount is determined.
This area has changed significantly in the last few months due the mortgage meltdown last year. The current value of your home in an appraisers eyes has been recently been placed under some very heavy guidelines under the new code of conduct made active on May 1, 2009.
Foreseen Problems with new code of conduct:
- The biggest change in this law is that mortgage lenders and loan agents can no longer be in direct contact with the appraiser. This change was intended to put forth the best interest of the consumer by terminating loan originators from pressuring appraiser, but the outcome has instead lead to some very misleading home evaluations.
- Third party appraisal services are being used by more loan originators. The problem here is that experienced appraisers are full of work leaving the inexperienced appraisers to pick up appraisals that are possibly out of their area of expertise – which could lead to an inaccurate or misguided appraisal.
- In older communities, homes can vary greatly along one street. These homes are typically harder to directly compare because of largely varying square feet between neighbors, upgrades, and any remodels or additions made or not made to the homes on the surrounding area.
To best prepare for an appraisal on your home, ask your local real estate agent to present a list of recently sold comparables within the last three months. This will assure that the appraiser takes into consideration the top-valued homes in comparison to your own when the appraiser formulates the value of your home. Once you receive the appraisal, look it over thoroughly and make sure the appraiser did not miss a bedroom, bathroom, or mistake a finished area for unfinished.
Abiding by these guidelines will not only protect you and your most prized investment, but will best prepare you for whenever the market drastically changes. If in doubt, consult your local real estate agent. Realtors are experts in their field due to the fact that they are constantly studying recent market information, making them the best resource in assisting you with any of your real estate questions.