The last few years served numerous challenges to various facets of life. Fortunately, the housing market saw some positives during the peak of the pandemic. In particular, high buyer demand resulted in soaring home prices, benefitting sellers.
However, the Federal Reserve's actions to combat inflation led to a steady increase in mortgage interest rates throughout 2022. That dampened homebuyer interest and, subsequently, home prices. Due to these fluctuations, homeowners may need clarification about their home's current value. Many wonder whether it is a good time to sell or access their equity.
Market Value and Comps in Real Estate
Market value is the amount a willing, fully informed buyer would pay for a property. It requires factoring in the costs of comparable homes recently sold in the same neighborhood. Some critical criteria when calculating a home's value include the following:
Location
It would help to compare prices from the same neighborhood and near the home. This is a crucial factor because it is unchangeable. A home's land will only appreciate if the area around it improves. Homes near urban areas, parks, and public transportation typically have higher values.
Home Size
Comps ought to have the same number of bedrooms and bathrooms, similar square footage, and the same number of stories. Size is crucial since homes with more square footage tend to have higher values.
Features
Comparable homes should have similar finishes, updates, and amenities. Features such as a swimming pool or gourmet kitchen may increase a home's value, but it ultimately depends on the buyer's preferences.
Age
Comps should be roughly the same age. Age is essential since newer homes tend to have more contemporary designs, layouts, systems, and appliances, which can increase their value.
It is best to collect three to five comps and group them to determine a home's value using comps. Then, you should generate a report determining a market value based on these homes' sale prices and details. The two types of reports you can get are comparative market analysis (CMA) or an appraisal, depending on the person doing the calculation.
Market conditions like supply and demand can affect a home's value. Prices may decrease if there are more houses for sale than potential buyers. In contrast, prices may rise with more buyers than available properties.
Determining the Value of Your Home
You can start by looking up recent home sales in your neighborhood to understand what comparable homes are selling for. That will help you determine the value of your home. You can use online real estate websites or work with a real estate agent to obtain this information.
However, remember that the market value you receive can differ based on such factors as market speed, comp selection, and the subjective nature of human calculations. Are you considering selling your house? It would help to perform a comparative market analysis with the help of a real estate agent.
A CMA compares your home to similar homes in the same neighborhood that recently sold. By analyzing the similarities and differences between your home and the comps, your agent can estimate the fair market value of your home.
To make a sound real estate investment, you must understand how to calculate home values and what factors impact them. Unless you are an expert in real estate, it is best to work with a skilled and dependable realtor.
For more real estate tips and to determine your home's value, please contact Texas Roadrunner Realty at 210-598-7600.
