It’s no easy task to price a home right for both a rapid sale and the best possible sale price. It gets even more confusing when you examine the several types of home valuations, such as assessed and market value. It’s difficult to determine how much to sell your home for when all of these numbers are thrown into the mix. Let’s look at assessed and market value, as well as how much to offer your house for in Houston.
Assessed Value
In a nutshell, assessed value “is determined by the county property assessor to establish how much a home is worth for tax purposes.” Almost every homeowner will incur property taxes, which are used by local governments to fund anything from schools to road construction.”
As a result, assessed value isn’t necessarily the market value of a home; rather, it’s an estimate of how much it’s worth for tax purposes. And there are a number of factors that go into calculating this number. Here are a few instances of what I mean…
- Lot size and land value and potential – If, for example, “the assessor thinks the land has potential (it’s in a good area ore similar plots are in high demand), they might levy a higher tax.”
- Improvements to the house and property – The county assessor “will look at any improvements that you have made on the home that could increase its value (like building an addition, adding solar panels, or closing in a patio) and consider any income you could make from it (like renting out a guest house).”
At bottom, the assessed value is all about loss – that is, “the loss to the homeowner and the city if the property were to be destroyed.” The county assessor is basically attempting to figure out how much it would cost to replace your house if it burned down or was destroyed in a natural disaster, for example.
Market Value
Unlike evaluated value, market value is essentially determined by supply and demand. It is a home’s valuation that is ultimately determined by what purchasers are prepared to pay for it, which means it can fluctuate substantially.
“While assessed value will be calculated annually or every five years depending on your municipality, market value,” according to industry pros, “might vary dramatically throughout the year — and even month to month. The amount a buyer is willing to pay for a home or the price a seller is willing to accept is known as market value. Its term refers to the source of housing values in the real estate industry. When the market is hot and there is a lot of demand for homes in a particular location, property prices will rise because buyers are ready to pay more to live there. When no one wants to buy property in a certain location, the market value drops.”
Market circumstances and supply and demand, however, aren’t the only factors that influence market value (also known as fair market value). The property’s condition, as well as desirable features and modifications, are important considerations. There’s also the matter of current purchasing habits to consider.
Market value is the most important consideration when deciding how much to list your home in Houston, but smart brokers also consider assessed value. Call (713) 866-4000 to learn more about how your Houston agent can assist you in determining a listing price.
How Much to List For
Because the assessed value is generally less than the fair market value, you’ll rely significantly on market value determined by a comparative market analysis (CMA) when determining how much to list your house in Houston.
Once you’ve considered assessed value, here are the basics of performing a CMA . . .
“To begin, look at every comparable home that has been listed in the same neighbourhood as yours in the last six months. Comps older than three months aren’t used by appraisers, so you could wish to reduce the time frame even more. You’ll want to get as near as possible to the final appraised worth of your home. Unless there are only a few comparable homes in the area or the property is rural, the homes should be limited to those within a 12-mile radius of yours.”
Then you need to make some more comparisons with respect to your CMA, looking at . . .
- Original list prices of the homes compared against final sales prices
- Expired and withdrawn listings
- Pending sales
- Active listings
- Square-foot price comparisons
Having done all this, your next step is to consider market-dependent pricing – that is, analyzing pricing based on market conditions.
“Suppose,” for example, “”Let’s say the last three comparable sales in your neighbourhood were all for $250,000.” In a buyer’s market, your sales price may have some wiggle space for negotiation, but you’ll want to be close enough to the most recent comparable sale to persuade a buyer to see your house. In that market, you might need to price your home at $249,900 and settle for $245,000 to sell.””
“In a seller’s market, you could wish to add 10% more to the most recent comparable sale. If there’s low inventory and a lot of buyers, you might ask a higher price than the previous comparable sale. That $250,000 house may fetch as much as $265,000 or more.”
Ultimately, local market conditions matter a lot.
Lean on Your Houston Agent’s Expertise
The terms “assessed value” and “market value” are simple to grasp. The challenge is determining an exact market value. If you don’t, you’ll have a much harder time selling for the price you want. Your Houston agent, on the other hand, can assist you in this situation. So, if you’ve figured out the difference between assessed and market value and want to know how much to list your house for in Houston, give us a call at (713) 866-4000.