From deciding on the ideal time to sell to simply covering your bases with your real estate agent, determining the property value is a necessary step in the selling process. You’ve done your homework, which means you’ll be all the more prepared for the sale and for negotiations.
So how exactly do you estimate the value of a home?
While the knowledge here is invaluable, pairing it with our specialized guide on how to evaluate a house will give you a 360-degree understanding of the subject.
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How do I calculate the value of a house?
Look for comparable properties in your area
Comparable properties (comps) are a universal method to understanding what your home price guide might be. Comparable properties will be similar in location and recently sold.
Facilities, like swimming pools and land size as well as location are all important factors. One of the ways you can take a look at sold properties is to use the Property Value tool. Type in your street address or neighbourhood and get suburb insights like highest and lowest house sale price.
Compare only similar properties
Of course your home is absolutely unique. It’ll be tough to find another home with the exact same features as yours, especially one that was recently sold. But you’ll want to compare properties that are as similar as possible.
These are a few defining features:
- Size of home ie: number of bedrooms and bathrooms
- Type of building (if in an apartment, is it a new building or a heritage? If a house, how old is the construction?)
- Size of the land lot as well as size of construction
- Condition of home (is it in good shape or in need of a renovation? How old or new are the fittings and fixtures?)
- What extra features does it have? (Parking, garage, swimming pool, lawn…)
Let’s use an example to illustrate this: let’s say you live in a modern, Californian style bungalow and you’re looking at a similar house on the same street. You might think your house has a higher market value if it has a bigger garden and rear access.
On the other hand, perhaps you saw this neighbour of yours renovate not too long ago. This may give it a higher value estimate. This may be how you come to a conclusion on the estimate.
But even with the knowledge of these factors, any estimated property value will be a guess and shouldn’t be considered as final.
Keep up to date on the market
Looks at comps is important but very specific to your type of home and the location. If you’re looking to sell your home, it’s vital to look at market insights and available data to understand where buyers are looking to buy a home and what kinds of properties they’re looking for.
You can also use Property Value for this. They indicate important information like auction clearance rates, which gives perspective on the demand for your neighbourhood, and days on the market, which is the number of days a property spent on the market before being sold.
Aside from keeping track of real estate news, you can also use another tool called the Home Value Index by Corelogic. The Corelogic data shows you price changes throughout the country. If the average prices in your suburb are going up, it probably means the value estimate of your home is up too.
What influences the estimate home value of a property?
An estimated property value is best left to the professionals. They will be the most knowledgable about the market as well as the intricacies of your home to estimate home value more accurately. There are many factors and variables at hand that the average person might not be aware of.
But if you’d like an idea of what the experts look at, here are some of the factors that influence property value.
- Size of home build and lot size
- Condition of the home
- Number of bedrooms and bathrooms
- Location and curb appeal (curb appeal is how attractive the house would be to a potential buyer)
- Energy efficiency rating (the higher the efficiency, the more attractive)
- Carpark spaces
- Any exterior feature like a garden or pool
General influencing factors
- Is it a buyer’s or seller’s market?
- Any home loan or interest rate particularities
- State of the economy
- State of property market and median house prices
- Growth in your area
Common mistakes made when trying to estimate home value
When trying to get an estimated value range, there are some common pitfalls for prospective sellers.
- Comparing homes that aren’t similar or that were sold too long ago
- Attaching sentimental value to a home
- Not using market insights to gauge the state of the Australian property market
- Relying too much on the prices of properties currently on the market. The market value is a better indicator of the actual value. Properties on the market are just price guides.
- Favouring less established sources of information over reliable, trusted sources eg: Corelogic.
How much is my property worth?
This is a hard question to answer because there are many things to come into play when determining the worth of your home.
Market trends fluctuate, as does the economy. So the value of your property is attached to the time of the sale. When you have a buyer, that will give you the most accurate idea.
You can also rely on real estate agents to help you make more informed decisions. Their job is to know about trends, market insights and even more specific information like days on the market, median house prices and how your property compares to others around it.
If you’re wondering whether it’s a good time to sell, speak to a local real estate agent for more property price estimates.
Alternatively, some like to use an online home value estimator, and there are lots of those out there. A home appraisal calculator is used to factor in all the specifics about your home.
Unfortunately, there isn’t one most accurate home value estimator. Which is why most people choose to speak to a professional. But it’s worth it to try out a free home value estimator to get an initial idea first.
How do you calculate a fair market value?
Fair market value is the value of a home when both the seller and buyer both don’t need to sell or buy and when both parties are aware of all the facts.
The best way to determine what’s fair is to look at how comparable properties have sold recently. That will bring you to a more accurate way to estimate home value.
How do banks estimate home value?
All banks and lenders will have their own set of criteria to calculate the value of a property. That value will then act as security against your home loan.
To avoid biased reviews, most banks and lenders will use an independent valuer when they estimate the home value.
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