How to Get an Accurate Valuation, Part 1
This is the first in a two-part series on home valuation.
When it’s time to sell your home, the first thing most people want to know is, “So, what’s it worth?”
That’s an important question! The valuation of your property matters a great deal. If it’s too low, the home might sell for less than it’s worth. Overestimate, and it might languish on the market.
So, where’s the middle ground? How can you get an accurate home valuation?
Don’t Rely on the Online Estimate
Websites like realtor.com, Redfin and Zillow provide home value estimates. But online home value estimate tools can be off by thousands of dollars. They’re just an algorithm’s best guess at your home’s valuation based on recent area sales and property tax assessments. This can be a good basic source of information, but you shouldn’t base any important decisions on what you find online.
What is Home Valuation Based On?
In reality, your home’s true value is a complicated equation with lots of factors. It’s a professional’s understanding and opinion of the local competition and buyer demand for your area. Home valuation takes into account:
- Age and type of property
- Square footage and total room count
- Fixtures and features
- Construction and state of repair (or disrepair)
- Improvements made to the property
- Position within the neighborhood
- Surrounding amenities
- Services charges or any other liabilities
- Recent sales prices of comparable properties nearby
How Do I Find Out My Home’s Valuation?
A professional home appraisal is the most accurate way to find out your home’s valuation. All states in the U.S. require appraisers to be state-licensed or certified if they’re going to provide appraisals to federally regulated lenders. If you’re ready to get an accurate valuation for your home, ForSaleByOwner’s Pro Pricing service is a great resource for determining the value of your home.
What’s a BPO, and Why Does It Matter?
A broker’s price opinion (BPO) is ordered by financial institutions to determine the potential selling price or estimated value of a home. A BPO uses a hired sales agent: a real estate agent, a real estate broker, an appraiser or other qualified person. It’s often ordered when a financial institution thinks the expense and delay of a professional appraisal is unnecessary (a BPO can cost as little as $150).
In the BPO, financial institutions can dictate which neighborhood comps can be used, where the comps may be located, timeframe of sale and when the order must be completed. This is opposed to an independent appraiser, who makes those determinations themselves.
Something to think about when considering bank-required BPO versus an independent appraisal: A lender is better served by a low appraisal when granting you a mortgage, and they are better served with a high BPO when establishing and negotiating a selling price. You’ll want to stay on top of the BPO process and ask a lot of questions about what information is being considered and why.
Remember: It’s an Opinion
People are the ones performing the appraisal or BPO of your home, and no one’s error rate is zero. You have the right to disagree with an opinion, and you can do a lot to maximize the appraisal. Read part two of this series to find out how.