One of the benefits of having a world of information at our fingertips is…well…having a world of information at our fingertips! But that also means having a world of mis-information at our fingertips, too.
Trying to find out your home’s value before you put it on the market is crucial. With all of the resources available online, how do you know what information to believe and what to discard? Should you hire an appraiser, or is an online estimator enough? And what about the Harris County Tax Appraisal value vs its Market Value? How do real estate agents fit in, and how is their estimate different than the others?
Here’s some info to help you decide which option is best for you. Keep in mind, there’s a term in economics called “perceived value” that’s described as “the worth that a product or service has in the mind of the consumer.” Basically, there are no guarantees in any of these methods as to what a buyer will pay for your home, so choose wisely.
Online Real Estate Estimators
Real estate sites like Trula, Zillow, Redfin and others have given us easy access to real estate buying and selling. They provide a value service in educating the general public about the buying and selling process, what’s available in the market, and they provide a place for people to sell their homes without the services of a real estate agent. Overall, this is a good thing.
Where online estimators fail is that they don’t provide complete data on homes sold, only on homes listed because the comparison property values are based solely on publicly available data. This ultimately hurts everyone because Sellers could be basing their list price on their neighbors home that’s been sitting on the market for months, or worse, they could sell their home for less than they needed to based on a low list price down the street. You never know the circumstances of a sale – that low price could have been a result of distress which required a quick sale. Getting complete data based on actual sale prices is crucial to pricing your home right, and getting the most out of the sale.
Tax Appraisal Websites
If you’re in Our Markets, Harris County Appraisal District assesses the value of your home and determines your taxes based on the “appraised value”. You’ve likely noticed that the “appraised value” on your property’s page is not always the same as the “market value”. Here’s why:
The county tax appraisers only determine the value of your home based on its exterior condition, and the information they have on the home based on its most recent permitting. What this means is that if the interior of your home has lots of valuable upgrades or is significantly improved over your next door neighbor, but you can’t see those improvements from the outside, the appraised value will not reflect the improvements you’ve made. That’s great for your tax bill, but terrible if you use that value to determine your listing price.
Using the tax appraised value of your home to price it is a mistake for the reason mentioned above: your appraised value may be less than its actual value in the market. (Side note: you have the right to protest the value of your home to the appraisal district if you feel the appraised value is too high or low.) Only when there are few to no comparable properties sold recently around your home is it appropriate to estimate your sales price based on your appraised value. In our opinion, this is the least reliable method of selling your home for the best price.
Licensed Real Estate Appraisers
Pro: Inarguably the best, most accurate way to determine the value of your home.
Con: It’s not free.
Appraisers have a number of methods to determine the value of your home, whether there have been recent sales in the area or not. For residential real estate, these include the sales comparison approach and the cost approach. (The income approach is also used by appraisers, but only for commercial or investment property.) Licensed appraisers have access to data for sold properties unavailable to the general public (or online estimators), and they will visit the home in person to make their analysis of the home’s value. They also consider the market area data, analysis of trends in the real estate market, whether the property’s “highest and best use” is maximized, and the information about your particular home’s features and weaknesses.
Real Estate Agent’s CMA (Comparative Market Analysis)
Agents usually call their report on the value of your home a CMA because, well 1. it’s a marketing thing, and 2. they can’t call it an appraisal because that’s a term only licensed appraisers can use for their analysis. The big difference between the two is this: a licensed appraiser MUST follow a certain set of guidelines and standards to appraise your home, while agents do not have to.
Any agent can sit at their desk and pull the market data for you, send you a presentation, and call it a CMA. That will give you a quick and dirty idea of what your home will sell for in the market, and it will be pretty accurate as long as your home isn’t much different than the homes on the report.
The trouble with the instant market value report (even ours) is that it doesn’t take a home’s condition into account, or the condition of other comparable homes in the market. A good agent will insist on seeing your home in person, and will take the time to view other homes comparable to yours on the market before offering an opinion on your list price. In fact, a good agent’s CMA is not much different than the sales comparison approach that appraisers use.
We know that some folks don’t turn to realtors to price their home because they don’t want to pay 3% – 6% of the price if they decide to list their home one the MLS. They instead might want to use the CMA to price their home and sell it themselves to save money. We get it.
At Buffalo Bayou Realty, we help bridge the gap between selling yourself and paying the services of a realtor to sell your home by offering $5,000 full service listings. You’ll still get all the services of a typical brokerage, but at a fraction of the cost.